There are LOTS of ways to answer this question, usually within the context of a monthly payment....

• I'll buy based on the amount that will allow me to keep the same monthly payment as my prior, smaller home. 
   
  
• I'll buy based on how much of my monthly budget I want to be spending on housing.
   
  
• I'll buy based on the highest amount that my lender will qualify me to purchase.
   
  
• I'll buy based on however much money it will take to accomplish my vision for my new home.
  

These conversations can be had with your spouse, with your loan officer, with me, etc. -- the important part, however, is to have these conversations.  We need to know how much money you want to spend on your new home, so that we can be looking for the right houses for you!