How much income & down payment is needed for a $400k home?

Have you been looking at homes but are concerned about being able to afford a home priced at $400,000 or more?

Just because home prices are elevated doesn’t mean you can’t achieve your goal of home ownership. 

The median home price in the second quarter of 2025 was $410,800. That means that most folks were getting mortgages for homes that cost more than $400,000. That number may seem like it's a challenge to afford, but it's still possible, even in the current environment. 

You can take several steps to improve your ability to afford a home priced at $400,000 or more. Saving for a down payment, reducing personal debts, and managing your credit score are just a few ways to afford a home priced around the median U.S. home price. 

You can continue reading to get specific advice or apply for a mortgage pre-approval. A mortgage pre-approval is a common first step that homebuyers take to begin their journey to a new home.

To afford a $400,000 home, assuming a 20% down payment and a 6.5% interest rate on a 30-year mortgage, you would need a gross monthly income of about $7,786.55. This assumes you have $1,000 in monthly debt. 

To understand how to get to this number, you first have to understand how much your monthly payment would be with this mortgage type. With the listed conditions, this works out to estimated 2,348.22 per month, not including taxes or insurance. Then, add in your additional debts, that’s $3,348.22. Then take your payments and divide by a debt-to-income ratio of 43%. That should give you a necessary monthly income of $7,786.55 to afford a home worth $400,000 with the conditions described. 

Keep in mind that mortgage lenders look at debt-to-income ratio to help determine affordability. DTI ratio measures how much money you earn versus what you spend on debts. It’s calculated by dividing monthly debt payments by your gross monthly income. As a general guideline, your DTI ratio needs to be under 43% to be considered for most mortgage loans. 

Please remember that the 43% DTI ratio is only a guideline. Several factors, such as your credit score, property taxes, insurance expenses and other debts can affect the mortgage approval. To get a better idea of your finances and figure out how much money you need, talk to a mortgage expert. A mortgage professional can customize the calculation to fit your situation and find the right mortgage for you.

When purchasing a home worth $400,000, you have several down payment options available. The down payment is the initial upfront payment you make toward the total cost of the home. Here are some common down payment options:

Putting down 20% of the home's purchase price is a traditional down payment option. For a $400,000 home, a 20% down payment would be $80,000. This option may help you avoid private mortgage insurance (PMI) and can lead to more favorable loan terms.

A 15% down payment on a $400,000 home would be $60,000. This is a moderate down payment option that can help reduce the initial cash outlay while still providing some benefits in terms of potentially lower monthly payments compared to lower down payment options.

For 15% down payment options, and all other down payment options under 20%, borrowers will be required to pay, private mortgage insurance (PMI).

A 10% down payment on a $400,000 home would be $40,000. This is a lower down payment option that may be suitable for buyers who want to purchase the property sooner with a smaller initial cash requirement.

A 5% down payment on a $400,000 home would be $20,000. This is a lower down payment option, but it may lead to higher monthly mortgage payments.

Some loan programs, such as certain types of conventional loans and government-backed loans, offer down payment options as low as 3%. For a $400,000 home, a 3% down payment would be $12,000. While this can make homeownership more accessible, it often comes with higher monthly payments. 

It's important to consider the pros and cons of each down payment option. While a lower down payment can make homeownership more attainable, it may also lead to higher long-term costs due to increased interest payments and potential mortgage insurance premiums. Additionally, each lender may have different requirements and options for down payments, so it's essential to explore different loan programs and discuss your specific situation with a mortgage lender to determine the best down payment option for you.

To afford a $400,000 mortgage, follow these tips to enhance your financial preparedness:

Aim to save for 10%-to-20% of the home's purchase price, which would be $40,000-to-$80,000 for a $400,000 home. Making a larger down payment can lead to better mortgage terms and lower monthly payments.

A good credit score will make it easier to qualify for a mortgage with favorable interest rates. Pay your bills on time, reduce debts, and avoid opening new credit accounts before applying for a mortgage.

Assess your budget

Analyze your current income, expenses, and savings to determine how much you can allocate to housing costs. It's a good idea to maintain a debt-to-income ratio of 43% or lower to keep your finances where they need to be to get mortgage approval.

Get pre-approved for a mortgage to understand how much a lender is willing to lend you. This will help you set realistic expectations and narrow down your home search.

Consider additional costs

Remember that homeownership comes with additional expenses beyond the mortgage, such as property taxes, insurance, maintenance and utilities. You should factor these into your budget when shopping for a home.

Different lenders offer different rates and terms, so compare mortgage options to find the best mortgage deal for your situation.

Be patient and realistic

Affording a $400,000 mortgage may take time and discipline. Avoid rushing into a purchase that strains your finances and be patient in your home search.

Get advice from a money expert to make smart decisions and customize your financial plan to fit your situation. 

By taking these steps, you can work toward affording a $400,000 mortgage and be better prepared for the responsibilities of homeownership. To handle a $400,000 mortgage comfortably, it's crucial to plan well and make informed choices about your finances.

For those who already own a home, they can access their home equity to help fund expenses they may have.

Accessing home equity allows borrowers to use a portion of the wealth they have in their home as they may need. Many borrowers choose to use their funds for larger expenses and investments in their future, such as schooling costs, down payments on second or rental homes, consolidating debt and home renovations.

A popular choice homeowners use to gain access to their home equity is through a HELOC (Home Equity Line of Credit). This gives borrowers a line of credit based on their equity that they can draw on as they need while only paying interest. The period is known as a draw period.

As a HELOC draw period comes to an end, borrowers will enter a repayment period and pay back their principal loan and interest.

Have you already identified a home in the $400,000 range? If you already have a home in mind, that's fantastic. If you don't, you can still apply for a mortgage pre-approval. 

When you get pre-approved for a mortgage, it provides you with an idea of what you'll likely get approved for. It also shows real estate agents and home sellers that you're serious about looking for a home. Apply online to start your journey toward a new home.

Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Refinancing your mortgage may increase costs over the term of your loan. Restrictions may apply. 

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