In late 2021, the median home sale price topped $400,000 for the first time—and it’s remained well above that threshold ever since, according to U.S. Census Bureau data. If you are wondering how much income you need to afford a $400,000 house, in a sense you’re just about smack dab in the middle of the market.
There’s an obvious caveat here: The monthly payment for a $400,000 home varies widely based on factors such as the size of your down payment, your mortgage interest rate, and any mortgage insurance requirements.
And, how much house you can get for $400,000 depends entirely upon where you want to live. For example, 2024 data from the National Association of REALTORS put the median home price in Todd County, South Dakota at just $46,930, while it was 33 times higher at $1,579,260 in Marin County, California.
Despite these reservations, $400,000 is a useful benchmark for thinking generally about the U.S. housing market and shaping expectations for your home search, wherever you live. Let’s take a look at basic guidelines that can help you do the math to figure out whether you can afford a $400,000 home on your current salary.
Searching for a $400,000 home? Your down payment amount matters
A common piece of home shopping advice states that you need a down payment equal to 20% of a home’s price. Here’s the truth: Conventional home loans from private lenders are available with down payments as low as 5%, or as low as 3% if you’re a first-time homebuyer. That said, if you pay less than 20% down, the lender will most likely require private mortgage insurance.
Government-backed FHA loans may allow a down payment of 3.5%, while VA loans and USDA loans can help qualified applicants buy a home with no down payment required.
A smaller down payment might make it easier to get into a home because it means less cash is required at closing. But because you’re financing more of the home’s sticker price, you have to take out a larger loan, guaranteeing that your monthly mortgage payment will be higher.
Let’s do some basic math to see how big the impact is. If you put 3% down on a $400,000 home, that’s a $12,000 down payment, while 20% is $80,000 down. In the former case, you’re financing $388,000—in the latter, your mortgage loan would be just $320,000.
I’ve chosen to use the mortgage calculator on the U.S. Department of Defense Office of Financial Readiness website, but there are plenty of options to choose from. Selecting a 7% interest rate on a 30-year mortgage with the smaller 3% down payment (leaving the insurance and property tax fields at zero to keep it simple) gives you an estimated monthly payment of about $2,581. With 20% down, the estimated monthly payment is about $2,129.
The mortgage interest rate you can get makes a big difference. If we drop the rate to 6% from 7%, the payment amounts fall to around $2,326 at 3% down and around $1,919 at 20% down. The national average interest rate on a conventional, fixed-rate 30-year loan has remained stuck around 7% for months now. Some analysts see the potential for slightly lower rates later in 2025 or 2026.
While the average interest rates are subject to economic factors outside your control, your financial profile goes a long way toward determining if you get the lowest rate on offer or not. You typically need at least a 620 credit score to get approved for a conventional mortgage—though some FHA lenders may work with borrowers who have scores as low as 500 if they can provide a 10% or greater down payment.
Still, even 620 isn’t a stellar enough score to get you the very best rate. The credit bureau Experian—citing data from Curinos on average mortgage rates by FICO Score—showed a difference of more than 80 basis points between the rate for someone with a 620 score and the rate for someone with a score of 760 or higher on a 30-year loan.
In other words, it pays to have excellent credit. A higher credit score could end up saving you tens of thousands of dollars over the life of your mortgage.
What’s your debt-to-income ratio? Lower is better for a $400,000 home
Your debt-to-income (DTI) ratio is a calculation that compares your monthly debt payments to your gross monthly income. If your DTI is too high, it could prevent you from getting a favorable interest rate on your mortgage or mean you'll get prequalified for a lower mortgage amount than you’d hoped.
To find your DTI, you must first divide your debt payments by your income. If you have a $60,000 yearly salary, that gives you a gross monthly income of $5,000. And if you had $1,800 per month in mortgage and debt payments, divide 1,800 by 5,000 to get 0.36, then multiply by 100 to get a DTI of 36%.
Lenders typically prefer to see a DTI of 36% or lower, though many will still work with applicants who have a DTI of up to 43%. As you start approaching a 50% DTI, that signals to lenders that you’d likely struggle to repay a loan, while a DTI higher than 50% is likely to be disqualifying.
If you’re hoping to borrow $300,000 or more in order to finance the purchase of a $400,000 home, paying down as much existing debt beforehand as possible would be a smart move.
How much income do you need to afford a $400,000 home?
“A quick, back-of-the-envelope rule of thumb is that a buyer should budget between three and four times their annual income for a new home purchase,” says Jacob Wood, a broker with Coldwell Banker Warburg. Using this method, you may be able to afford a $400,000 home if your household income is $100,000 or more.
Another rule of thumb is the 28% rule: According to this method of calculating what you can afford, you should spend no more than 28% of your gross monthly income on your housing payment. A yearly salary of $100,000 breaks down to a gross monthly income of approximately $8,333, and 28% of that is about $2,333.
Remember that we ran a few different estimates earlier in the article, and came out with scenarios where a monthly housing payment on a $400,000 house could range from $1,919 to $2,581. It’s certainly conceivable that with a large enough down payment, someone with a $100,000 annual income could afford a $400,000 home according to the 28% rule.
A caveat here is that the 28% rule dictates taking your full housing payment into account, meaning principal, interest, taxes, and insurance. Our estimated mortgage payments only include principal and interest, so you’ll want to run your own estimates more closely tailored to your specific situation.
One more guideline before we wrap up on this topic is the 28/36 rule. Following this method of calculating affordability, your monthly housing payment should not exceed 28% of your gross monthly income—while your total monthly debt burden, including housing, should not exceed 36%.
Continuing our example from above, and assuming a homebuyer has a $100,000 annual income, the 28% part of the rule means the buyer’s mortgage payment shouldn’t be more than about $2,333, and the 36% part suggests monthly debt payments—including a mortgage payment—should not exceed $3,000. So, with a $2,333 mortgage payment, other debt payments should tally up to approximately $667 per month or less.
Where you’re more likely to find $400,000 homes
The good news for buyers is that, examining the NAR data on median home by county, roughly 96% of counties throughout the U.S. have median home prices of less than $550,000. That suggests you should be able to find something in the $400,000 or lower price bracket in most of the U.S.
Broadly speaking, the East Coast and West Coast tend to show the highest median home prices on the NAR’s map, while everywhere in between shows lower median prices.
Keep in mind that the median home price can vary even within a major metro area. For example, the NAR map showed Mecklenburg County, North Carolina—where Charlotte, the state’s largest city, is located—at a median home value of $460,450.
But neighboring Gaston County, home to Gastonia—one of Charlotte’s biggest satellite cities—shows a median home value of $296,340.
The $400,000 takeaway
Whether or not you can afford a $400,000 home depends on your down payment, how much debt you’re carrying, and factors such as insurance needs and property taxes. If you start house hunting and realize $400,000 is a bit of a stretch for your budget, Rob McGibney, president and chief operating officer at builder KB Home, suggests evaluating what you’re willing to be flexible on.
“Sometimes a small adjustment—selecting a different floor plan, opting for less square footage, or prioritizing certain design choices—can help bring costs down without sacrificing quality and livability,” McGibney says. “Additionally, financing plays a crucial role. Exploring different loan structures and first-time buyer programs can provide greater flexibility and help make homeownership attainable.”
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