When you’ve acquired your eye on a $400,000 house, you’re in all probability asking your self: How a lot home can I afford? The revenue wanted for a $400k mortgage comes down to a couple components, like your down fee, DTI, credit score rating, and even your location.
Whether or not you’re home attempting to find a rental in Boston, MA or a house in Phoenix, AZ, understanding how your funds affect affordability might help you propose properly. On this Redfin information, we’ll break down the numbers, components, and ideas that can assist you purchase a $400,000 house that works to your price range.
Most patrons have to earn $100,000 to $135,000 per 12 months to afford a $400,000 house.
This assumes common rates of interest, a typical mortgage time period, and a modest down fee.
Your precise revenue wants could fluctuate based mostly in your debt, credit score rating, and month-to-month bills.
What’s the revenue wanted for a $400k home?
The overall guideline is that your complete month-to-month housing prices shouldn’t exceed 28% to 31% of your gross month-to-month revenue. These prices sometimes embrace your mortgage fee (principal and curiosity), property taxes, owners insurance coverage, and any HOA charges.
To estimate the revenue wanted for a $400,000 house, you’ll want to contemplate your down fee quantity, mortgage rate of interest, credit score rating, debt-to-income (DTI) ratio, and placement, since property taxes and insurance coverage premiums fluctuate by area.
Instance state of affairs
Let’s assume the next:
House value: $400,000
Down fee: 20% ($80,000)
Mortgage: $320,000 with a 30-year time period at 6.5% curiosity
Month-to-month prices: ~$2,522 (contains mortgage, taxes, insurance coverage)
Estimated month-to-month mortgage fee (principal + curiosity): ~$2,022
Complete estimated month-to-month housing price: $2,022 + $400 + $100 = $2,522
So, on this state of affairs, you’d doubtless have to earn round $108,000 per 12 months to comfortably afford a $400,000 house whereas staying inside advisable housing price limits.
Remember that should you put down lower than 20%, you’ll doubtless should pay personal mortgage insurance coverage (PMI), which can enhance your month-to-month prices—and if property taxes are greater, you’ll want a fair greater revenue to qualify.
Now, let’s take a more in-depth look.
Key components that have an effect on how a lot home you may afford
The revenue wanted for a $400k mortgage will depend on extra than simply your wage. A number of private and monetary variables can affect your capacity to qualify for a mortgage and the quantity you’ll be accepted for.
1. Down fee
A bigger down fee reduces how a lot it is advisable borrow, which lowers your month-to-month mortgage fee. When you put down not less than 20%, you may also keep away from paying personal mortgage insurance coverage (PMI), which is an added month-to-month price required by most lenders when your down fee is beneath that threshold. .
2. Debt-to-income ratio (DTI)
Your debt-to-income ratio (DTI) compares your complete month-to-month debt funds, together with issues like scholar loans, automotive loans, bank card minimums, and different obligations, to your gross month-to-month revenue. Most lenders desire a DTI of 43% or much less, although many intention for 36% or decrease for extra favorable mortgage phrases.
Even should you earn a excessive revenue, a excessive DTI suggests you’re already carrying a major quantity of debt, which may make lenders hesitant to approve a big mortgage.
3. Rates of interest
Mortgage rates of interest have a direct affect on affordability. Even a 1% distinction can change your month-to-month fee by a whole bunch of {dollars}.
For instance, on a $400,000 house with 20% down, a 6% rate of interest may imply a month-to-month fee of round $2,400, whereas a 7% fee would possibly elevate it to about $2,650; a $250 enhance. That further price means you’ll want a better qualifying revenue.
As of June 2025, the common 30-year fastened fee is round 7%, which is greater than charges seen in prior years.
4. Credit score rating
Your credit score rating is a three-digit quantity that reveals how reliably you’ve managed debt, based mostly in your fee historical past, credit score use, and forms of credit score. Your rating helps decide your rate of interest and total mortgage eligibility. A better rating sometimes leads to higher phrases.
740 and above: Wonderful credit score, more likely to qualify for one of the best charges
620-739: Acceptable for many lenders, although charges could also be greater
Under 620: Thought of subprime; approval could also be troublesome and not using a bigger down fee or compensating components
Lenders view greater scores as much less dangerous, which may enhance your borrowing energy even when your revenue is on the decrease finish.
Learn>> How To Purchase A Home With Dangerous Credit score
5. Location and property taxes
Taxes fluctuate considerably based mostly on the place you purchase. In some counties, likeWestchester County, NY and Prepare dinner County, IL, annual property taxes may exceed $7,000 on a $400,000 house. In different areas akin to Maricopa County, AZ and Bexar County, TX, taxes could also be lower than $3,000.
6. Different monetary obligations
Recurring obligations akin to little one assist, alimony, or private loans are included in your DTI and cut back the quantity you may spend on a mortgage.
Ongoing prices akin to property taxes, owners insurance coverage, and potential HOA charges must also be thought of, since they’ve a major affect in your total price range.
These ought to be factored into any affordability calculation.
What it takes to afford a $400,000 house: side-by-side eventualities
Your capacity to afford a $400,000 house will depend on a number of key components: your down fee, credit score rating, mortgage fee, and current debt. Under is a comparability of three purchaser profiles as an instance how these variables can have an effect on your month-to-month prices and required revenue.
Purchaser Profile
Down Fee
Credit score Rating
Charge
Debt
Month-to-month Fee (PITI)
Estimated Earnings
Conservative Purchaser
20% ($80,000)
Wonderful (760+)
6.50%
$300
~$2,550
~$95,000
Typical Purchaser
10% ($40,000)
Good (700–740)
6.75%
$600
~$2,950
~$110,000
Low Down Fee Purchaser
5% ($20,000)
Truthful (660–680)
7.00%
$750
~$3,250 (incl. PMI)
~$125,000
Professional tip: Speaking to a mortgage lender early on might help you estimate your affordability based mostly in your monetary state of affairs—and will even unlock higher charges or down fee help packages.
Suggestions that can assist you afford a $400k mortgage
Listed here are some sensible steps to enhance your shopping for energy and maintain month-to-month funds manageable:
Enhance your credit score rating: Paying payments on time, decreasing bank card balances, and avoiding new debt can enhance your rating and enable you qualify for higher mortgage phrases.
Pay down current debt: Reducing your DTI by paying off bank cards or small loans might help you qualify for a better mortgage quantity.
Evaluate a number of lenders: Charges and costs can fluctuate broadly. Purchasing round offers you a clearer image of what you may afford.
Use a co-borrower: Including a partner or accomplice with revenue (and good credit score) could enable you qualify for a bigger mortgage.
Discover homebuyer help packages: Some state and native governments provide grants or favorable mortgage phrases for first-time house patrons.
Get pre-approved early: Pre-approval offers you a transparent price range and reveals sellers you’re a critical purchaser.
Learn>> What You Have to Purchase a Home in 2025
FAQs: Your $400k mortgage questions answered
1. What if my DTI is 43%?
You should still qualify for a mortgage, however you might face stricter mortgage phrases or greater rates of interest. When you’re close to the 43% threshold, contemplate decreasing or consolidating debt earlier than making use of for a house mortgage.
2. How can I calculate how a lot home I can afford?
To calculate your affordability, use the 28/36 rule. This rule suggests you retain housing prices underneath 28% of your gross month-to-month revenue and complete debt funds underneath 36%. On-line mortgage calculators might help you plug in your revenue, money owed, rate of interest, and down fee to estimate your value vary.
3. Ought to I embrace HOA charges in affordability estimates?
Sure. HOA dues are thought of a part of your complete housing expense and are included within the DTI calculation by most lenders.
4. How does a 5% down fee change issues?
Your month-to-month mortgage fee will probably be greater and also you’ll doubtless have to pay PMI. This will increase your required revenue to qualify.
5. The place can I discover $400,000 houses?
Use Redfin’s house search instrument to discover listings in your goal space. You may set value filters, view tax estimates, and get alerts for brand spanking new listings or value drops.
Planning forward pays off
Affording a $400,000 house takes extra than simply hitting a sure revenue. With good budgeting, manageable debt, and knowledgeable steerage, the revenue wanted for a $400k mortgage could be inside attain. When you’re questioning the best way to purchase a house in 2025, begin by understanding your monetary image and exploring mortgage choices early.
A mortgage advisor might help simplify the method by breaking down mortgage sorts, bettering your software, and figuring out mortgage packages that suit your targets. Having the appropriate assist could make all of the distinction to find a house that really works for you.
