For millions of people, owning a home is part of the American dream.

But for all its desirable qualities, buying a house is largely a business decision, one that involves financing, appraisals, contracts and settlement.

Home buying starts with a close look at your financial situation. Your income, debts and life style will largely determine the house you purchase. Here are some areas to examine:

How much do you make? Figure your income in terms of your annual wage as well as money you receive from regular outside work, stock dividends, interest income, pensions, alimony and other sources. Have copies of your income tax returns for the past two or three years available for lenders.

What are your debts? Do you devote much of your current income to credit card obligations, car payments, personal loans or other costs?

Where are your assets: How much cash or stock do you own? If you now own a home calculate how much equity (value minus debt) you have. In figuring the value of your home remember that your equity will be reduced by marketing expenses.

Are you eligible for a Veterans Administrationbacked loan or financing from a credit union or employer? Will your family help you purchase a home? If you tell lenders you've received a gift from your family they will usually require an irrevocable letter establishing that the money involved is indeed a gift and not a hidden loan.

Assuming that your personal debts equal no more than 30 to 35 percent of your monthly income, it is possible to get a mortgage equal to 2.5 to 2.9 times your gross annual earnings. If you make $22,000 a year and have $8,000 available for a down payment, it means you could reasonably expect to purchase a home for a maximum of $72,000.

But buyers should be aware that lending practices and the availability of money are subject to considerable variation. Continual changes in the money maket require a constant review of mortgage alternatives until your financing is actually in hand Shopping around will help you understand the lending process and get the best possible deal.