Buying a home is a process that requires getting comfortable with large numbers. The purchase price of the house, the down payment, the monthly payment — all big numbers.

A mortgage calculator helps you make sense of what can be abstract. Using it allows you to consider all the factors that can impact home affordability, quality of life, and wealth accumulation.

Not to mention helping you achieve peace of mind with what might be a bit mind-boggling.

Here's how to think through the calculations step by step.

Learn more: What first-time home buyers need to know

How to use the Yahoo Finance mortgage calculator

Just four data points will get you started:

Home price

Easy enough, this is the price you'll pay for the home you're considering. When it comes time to make the deal, the price may be a point of negotiation. Here, you can start with a price that buys you all the amenities you could possibly want — and then work down from there to achieve a real-life monthly payment you can afford.

Read more:

• What is the monthly payment on a $600,000 mortgage?

• How much is a mortgage on a $500,000 house?

• What is the monthly payment on a $400,000 mortgage?

• How much is the monthly payment on a $300,000 mortgage?

• What is the monthly payment on a $200,000 mortgage?

Down payment

The down payment is another number that might begin as a moving target. You might put in a number that's the bare minimum, say a 3% down payment, and then work your way up from there.

If you are a military-connected borrower using a no-down-payment-required VA loan, you may even have earned the right to put a zero here.

Learn more: How much down payment do you need for a house?

Loan term

A loan term is the number of years you expect to pay off the loan. You'll see that a 30-year fixed-rate loan is the default here. Don't let that stop you from investigating the monthly payment of a 15-year loan or one with an even shorter term. Quicker paybacks result in paying less interest and gaining value, or equity, in your home faster.

Learn more: 15-year vs. 30-year mortgage — Which is better?

Interest rate

You can take a look at the lender offers above to fine-tune your mortgage interest rate, but for now, put in a rate that you believe you'll qualify for. It's a good idea to resist the temptation to be overly optimistic here. It feels much better to qualify for a lower mortgage rate than you expected rather than the other way around.

Dig deeper: What determines mortgage rates?

What is included in a typical mortgage payment

Now that you've filled in the basics, the Yahoo Finance mortgage payment calculator reveals your estimated monthly payment with principal and interest estimates built in.

Here are typical costs often included in your monthly mortgage payment.

• Mortgage principal: The amount you owe on the loan. This is estimated for you.

• Mortgage interest: The interest you pay to borrow the money. This is included with the principal estimate.

• Homeowners insurance: An estimated monthly cost for the insurance premium you'll pay to protect your home in case of damage.

• Property taxes: The taxes you'll pay on your home and land. This is not estimated, but you can click on the dropdown link to add it to your estimated payment if you have an idea of how much it costs.

• Private mortgage insurance: If you put down less than 20% on a conventional loan, the lender will charge you PMI. You can put an estimate of that in the dropdown as well.

• HOA fees: Some neighborhoods charge homeowners' association fees to pay for maintenance and improvements on shared spaces. You can add that to your monthly payment calculation.

Tip: Other costs of homeownership are not built into the loan payment, including: utilities, maintenance, repairs, and upgrades.

The monthly payment breakdown

In the middle of the payment calculator is a pie chart showing a graphic breakdown of the main components of your monthly payment: principal and interest in blue, a property tax estimate in yellow, and the estimated homeowners' monthly insurance premium in teal.

Learn more: How much house can I afford? Use Yahoo Finance's home affordability calculator.

The mortgage payment formula

The Yahoo Finance mortgage calculator does the work for you, but for those who wish to look under the hood, here is the actual calculation:

A is the monthly mortgage payment (in dollars)

P is the principal amount of the loan (the amount you borrow)

r is the monthly interest rate (as a decimal)

n is the total number of payments over the life of the loan

Here's how to use the formula:

Convert the annual interest rate to a monthly interest rate: Divide the annual interest rate by 12. For example, if your annual interest rate is 5%, your monthly interest rate would be 0.05 / 12 = 0.004167.

Calculate the total number of payments: Multiply the number of years in your loan term by 12 (i.e. 12 months of the year). For example, a 30-year fixed-rate mortgage would have 30 years x 12 months = 360 payments.

Put the values into the formula: Once you have the monthly interest rate and the total number of payments, you can plug them in along with the home loan amount (P) into the formula to calculate the estimated monthly mortgage payment.

Remember, this is an estimate from a manual calculation. The actual payment may vary depending on factors such as private mortgage insurance and property taxes, which are included in the Yahoo Finance calculator but are still only estimates.

Learn more: What is mortgage insurance, and how much does it cost?

Why use a mortgage calculator?

Taking a mortgage payment calculator for a spin can be an interesting exercise. But there are some serious decisions it can help guide, as well. For example:

To determine the mortgage that's best for you

When shopping for a mortgage loan, you can compare the interest rates offered by different mortgage lenders by entering them into the calculator and seeing how a slight improvement in your rate can impact your monthly payment. Perhaps more importantly, you can get a feel for just how much interest you'll save over the life of a home loan.

Read more: Best mortgage lenders for first-time buyers

To consider different loan terms

A 30-year mortgage loan has traditionally been the standard loan term, but many other options exist. A shorter term will pay off the loan faster and set you on the path to greater wealth accumulation. That's important if you want to shorten the runway to your life after work.

You can also compare a fixed-interest-loan rate with an ARM's introductory rate. Adjustable-rate mortgages can be appropriate for home buyers who expect to move before the five- or 10-year introductory rate period ends.

To evaluate your down payment

A mortgage calculator can also provide a real-life comparison of how important a down payment can be in lowering your monthly payment. Or in deciding just how little you can put down and still afford the payment.

To avoid being 'house poor'

Being in a house that takes just about every last nickel of your income can be miserable. That's being "house poor." You don't want to be in a situation where you can't afford anything else, like vacations, contributing to savings and retirement accounts, and significant monthly expenses like childcare.

To consider refinancing options

When mortgage rates begin moving down, a mortgage calculator can help you know when to start shopping for a loan refinance. You can balance the costs of the new loan with the interest rate savings you can expect.

Dig deeper: What percentage of your income should go to a mortgage?

Mortgage payment too high? How to lower your monthly payment

Finally, a mortgage calculator can help you know where your sweet spot of affordability is. If the estimated payment is too high, you can consider these strategies to lower it:

• Buy less house. It sounds simple, but it may not be easy to adjust your expectations at first. Start looking at smaller homes or longer commutes. You may find the perfect — and more affordable — house.

• Make a larger down payment. (You'll also avoid paying PMI.)

• Qualify for a lower interest rate.

• Extend the loan term.

Mortgage calculator FAQs

What mortgage can I afford with a $70,000 salary?

With a $70,000 salary, you could comfortably afford a home of roughly $250,000. However, the exact number will depend on your mortgage rate, down payment amount, and whether you have other monthly debt payments.

How much income do you need for a $400,000 mortgage?

You would need roughly a $100,000 salary (probably a little more) to afford monthly payments on a $400,000 mortgage. This means a gross monthly income of at least $8,334.

How much income do you need for a $500,000 mortgage?

The recommended income for a $500,000 mortgage is at least $125,000, or $10,417 per month before taxes.