Enter your yearly salary, length of the Mortgage term, and interest rate into the home affordability calculator. The calculator will display your maximum mortgage you should take out, and the monthly payments of that mortgage.

Home Affordability Formula

The following formula is used to calculate the maximum loan someone should take out for a loan.

ML = YI* .28 * LT – IR*YI*.28

  • Where ML is the maximum loan
  • Where YI is your yearly income
  • LT is the lone term
  • IR is the interest rate of the loan

Home Affordability Definition

Home affordability is defined as the total value of a home that a person can afford based on their income.

How to calculate home affordability.

How to calculate how much money to spend on a home?

  1. First, use the 28/36 rule.

    This says that at max 28% of your income before taxes should go to a mortgage.

  2. Next, determine your yearly income.

    Make sure this income is the total yearly income before taxes

  3. Determine the loan term you wish to have

    The longer the loan the more interest will be paid.

  4. Calculate your max loan

    Enter the information from above, along with a fair market interest rate, into the formula to calculate the max loan.


What house can i afford?

This is one of the most common questions on the earth. The answer to this will be completely dependent on the individual and their personal and financial situations. One of the best pieces of advice out there is to use the 28/36 rule that says no more than 28% of your pre-income tax should be used on a mortgage and no more than 36% should be used on debt in general.

What is a good mortgage rate?

This typically depends on two main factors. First, your credit score. The higher a credit score, the better terms a lender will give you. The second factor is market conditions.

home affordability calculator
home affordability formula