Step 1 Determine your monthly gross income (annual gross income/12) Step 2 With a down payment of at least 5%, lenders use 33% of monthly gross income as a guideline for PITI (principal, interest, taxes, and insurance) and 38% of monthly gross income as a guideline for PITI plus other debt payments. Enter 33% or 38% depending upon whether other debt payments are present. Step 3 Subtract other debt payments (such as payments on an auto loan), if applicable. Subtract estimated monthly costs of property taxes and homeowner's insurance. Affordable monthly mortgage payment Step 4 Divide this amount by the monthly mortgage payment per $1,000 based on the current mortgage rates (see Exhibit 7-7). For example, for a 10%, 30-year loan, the number would be $8.78). Multiply by $1,000 Affordable mortgage amount Step 5 Divide your affordable mortgage amount by 1 minus the fractional portion of your down payment (for example, 0.9 for a 10 percent down payment). Affordable home purchase price X X