To calculate your ideal monthly mortgage payment, tally up your monthly debt from car loans, credit cards, student loans and other such debt payments, and add a mortgage payment that does not make your total debt payments more than 36 percent of your monthly gross income, recommends CNN Money. This is the formula used by most major lenders, and is typically considered as much debt as most borrowers can consistently repay.
CNN Money's mortgage calculator assumes a 30-year mortgage with 1 percent added for property taxes and 0.4 percent for homeowner's insurance. The formula does not factor in private mortgage insurance, which is necessary if the down payment is less than 20 percent. Its calculator offers fields on which to enter an annual income, a down payment, the term of a loan and an interest rate, and it returns the maximum price of a home. Setting a higher down payment lowers the monthly payment amount.
When computing monthly debt, include other savings needs, such as college or retirement accounts, and any other debts that need to be paid at other periods, such as child care, health insurance, tuition for private school or colleges, and alimony or child support payments, advises CNN Money.