If you’ve got your eye on a $400,000 home, you’re probably asking yourself: How much house can I afford? The income needed for a $400k mortgage comes down to a few factors, like your down payment, DTI, credit score, and even your location.
Whether you’re house hunting for a condo in Boston, MA or a home in Phoenix, AZ, understanding how your finances impact affordability can help you plan wisely. In this Redfin guide, we’ll break down the numbers, factors, and tips to help you buy a $400,000 home that works for your budget.
- Most buyers need to earn $100,000 to $135,000 per year to afford a $400,000 home.
- This assumes average interest rates, a standard loan term, and a modest down payment.
- Your actual income needs may vary based on your debt, credit score, and monthly expenses.
What is the income needed for a $400k house?
The general guideline is that your total monthly housing costs should not exceed 28% to 31% of your gross monthly income. These costs typically include your mortgage payment (principal and interest), property taxes, homeowners insurance, and any HOA fees.
To estimate the income needed for a $400,000 home, you’ll need to consider your down payment amount, loan interest rate, credit score, debt-to-income (DTI) ratio, and location, since property taxes and insurance premiums vary by region.
Example scenario
Let’s assume the following:
- Home price: $400,000
- Down payment: 20% ($80,000)
- Loan: $320,000 with a 30-year term at 6.5% interest
- Monthly costs: ~$2,522 (includes mortgage, taxes, insurance)
Estimated monthly mortgage payment (principal + interest): ~$2,022
Total estimated monthly housing cost: $2,022 + $400 + $100 = $2,522
So, in this scenario, you’d likely need to earn around $108,000 per year to comfortably afford a $400,000 home while staying within recommended housing cost limits.
Keep in mind that if you put down less than 20%, you’ll likely have to pay private mortgage insurance (PMI), which will increase your monthly costs—and if property taxes are higher, you’ll need an even higher income to qualify.
Now, let’s take a closer look.
Key factors that affect how much house you can afford
The income needed for a $400k mortgage depends on more than just your salary. Several personal and financial variables can influence your ability to qualify for a loan and the amount you’ll be approved for.
1. Down payment
A larger down payment reduces how much you need to borrow, which lowers your monthly mortgage payment. If you put down at least 20%, you can also avoid paying private mortgage insurance (PMI), which is an added monthly cost required by most lenders when your down payment is below that threshold. .
2. Debt-to-income ratio (DTI)
Your debt-to-income ratio (DTI) compares your total monthly debt payments, including things like student loans, car loans, credit card minimums, and other obligations, to your gross monthly income. Most lenders prefer a DTI of 43% or less, though many aim for 36% or lower for more favorable loan terms.
Even if you earn a high income, a high DTI suggests you’re already carrying a significant amount of debt, which could make lenders hesitant to approve a large mortgage.
3. Interest rates
Mortgage interest rates have a direct impact on affordability. Even a 1% difference can change your monthly payment by hundreds of dollars.
For example, on a $400,000 home with 20% down, a 6% interest rate could mean a monthly payment of around $2,400, while a 7% rate might raise it to about $2,650; a $250 increase. That extra cost means you’ll need a higher qualifying income.
As of June 2025, the average 30-year fixed rate is around 7%, which is higher than rates seen in prior years.
4. Credit score
Your credit score is a three-digit number that shows how reliably you’ve managed debt, based on your payment history, credit use, and types of credit. Your score helps determine your interest rate and overall loan eligibility. A higher score typically results in better terms.
- 740 and above: Excellent credit, likely to qualify for the best rates
- 620-739: Acceptable for most lenders, though rates may be higher
- Below 620: Considered subprime; approval may be difficult without a larger down payment or compensating factors
Lenders view higher scores as less risky, which can increase your borrowing power even if your income is on the lower end.
Read>> How To Buy A House With Bad Credit
5. Location and property taxes
Taxes vary significantly based on where you buy. In some counties, likeWestchester County, NY and Cook County, IL, annual property taxes could exceed $7,000 on a $400,000 home. In other areas such as Maricopa County, AZ and Bexar County, TX, taxes may be less than $3,000.
6. Other financial obligations
Recurring obligations such as child support, alimony, or personal loans are included in your DTI and reduce the amount you can spend on a mortgage.
Ongoing costs such as property taxes, homeowners insurance, and potential HOA fees should also be considered, since they have a significant impact on your overall budget.
These should be factored into any affordability calculation.
What it takes to afford a $400,000 home: side-by-side scenarios
Your ability to afford a $400,000 home depends on several key factors: your down payment, credit score, mortgage rate, and existing debt. Below is a comparison of three buyer profiles to illustrate how these variables can affect your monthly costs and required income.
| Buyer Profile | Down Payment | Credit Score | Rate | Debt | Monthly Payment (PITI) | Estimated Income |
| Conservative Buyer | 20% ($80,000) | Excellent (760+) | 6.50% | $300 | ~$2,550 | ~$95,000 |
| Typical Buyer | 10% ($40,000) | Good (700–740) | 6.75% | $600 | ~$2,950 | ~$110,000 |
| Low Down Payment Buyer | 5% ($20,000) | Fair (660–680) | 7.00% | $750 | ~$3,250 (incl. PMI) | ~$125,000 |
Pro tip: Talking to a mortgage lender early on can help you estimate your affordability based on your financial situation—and may even unlock better rates or down payment assistance programs.
Tips to help you afford a $400k mortgage
Here are some practical steps to improve your buying power and keep monthly payments manageable:
- Improve your credit score: Paying bills on time, reducing credit card balances, and avoiding new debt can increase your score and help you qualify for better mortgage terms.
- Pay down existing debt: Lowering your DTI by paying off credit cards or small loans can help you qualify for a higher mortgage amount.
- Compare multiple lenders: Rates and fees can vary widely. Shopping around gives you a clearer picture of what you can afford.
- Use a co-borrower: Adding a spouse or partner with income (and good credit) may help you qualify for a larger loan.
- Explore homebuyer assistance programs: Some state and local governments offer grants or favorable loan terms for first-time home buyers.
- Get pre-approved early: Pre-approval gives you a clear budget and shows sellers you’re a serious buyer.
Read>> What You Need to Buy a House in 2025
FAQs: Your $400k mortgage questions answered
1. What if my DTI is 43%?
You may still qualify for a mortgage, but you could face stricter loan terms or higher interest rates. If you’re near the 43% threshold, consider reducing or consolidating debt before applying for a home loan.
2. How can I calculate how much house I can afford?
To calculate your affordability, use the 28/36 rule. This rule suggests you keep housing costs under 28% of your gross monthly income and total debt payments under 36%. Online mortgage calculators can help you plug in your income, debts, interest rate, and down payment to estimate your price range.
3. Should I include HOA fees in affordability estimates?
Yes. HOA dues are considered part of your total housing expense and are included in the DTI calculation by most lenders.
4. How does a 5% down payment change things?
Your monthly mortgage payment will be higher and you’ll likely need to pay PMI. This increases your required income to qualify.
5. Where can I find $400,000 homes?
Use Redfin’s home search tool to explore listings in your target area. You can set price filters, view tax estimates, and get alerts for new listings or price drops.
Planning ahead pays off
Affording a $400,000 home takes more than just hitting a certain income. With smart budgeting, manageable debt, and expert guidance, the income needed for a $400k mortgage can be within reach. If you’re wondering how to buy a home in 2025, start by understanding your financial picture and exploring loan options early.
A mortgage advisor can help simplify the process by breaking down loan types, improving your application, and identifying loan programs that fit your goals. Having the right support can make all the difference in finding a home that truly works for you.
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