How should I set my budget for home purchase

I'm thinking of buying a house. Most of my NW is in stock and it's about 1.2M (200k in 401k). My TC is historically about 500k due to the stock application but I would be conservative and assume my TC for the next couple of years would be around 300k. I am the only source of income in the household. My question is, what's the appropriate home price that I can safely live up with. My bank approved me for 1.8M mortgage but I'm not brave enough to go that far.

Edit: I feel safe for 1.2M but what about 1.5M or even more? I somehow have an impression that most of the people with similar TC and NW to mine spend like 1.2M on housing.