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In the first quarter of 2025, the median home sales price in the United States was $416,900, close to a decade-long peak. As you navigate this high-priced housing market, understanding how much income it takes to qualify for a mortgage will help you set realistic expectations and prepare effectively for your next move.
This guide covers the income needed for a $400k mortgage, the impact of down payments and interest rates, and tips to help you buy confidently, even in a competitive market.
Income needed for a $400k mortgage
Suppose you take out a typical 30-year fixed mortgage at a 6.5% interest rate with a 20% down payment for a $400k house. That means your estimated monthly mortgage payment would be about $2,640, including property taxes, homeowners insurance, HOA fees, and utilities. If you also carry $1,000 in other monthly debt payments, your total monthly obligations would come to $3,640.
Lenders typically use a maximum debt-to-income (DTI) ratio of 43% to determine how much income you need to safely afford those payments. To reverse-engineer the required income, divide your total monthly obligations ($3,640) by 0.43. That gives you a gross monthly income of about $8,465, or $101,580 per year. This is the salary needed for a $400k house to keep your DTI at or below 43% and qualify for a $400k mortgage under these conditions.
If you’re looking at homes above or below $400,000 and want to make a different calculation, try Better’s mortgage calculator to get a quick estimate of how your monthly payments may be affected.
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How DTI ratio affects affordability
Your DTI ratio is one of the most important numbers lenders look at when evaluating your mortgage application. It shows how much of your gross monthly income goes toward paying off existing debts, including your future housing costs. Calculating your DTI is straightforward:
DTI = (Total monthly debt payments / Gross monthly income) x 100
So if your gross monthly income is $8,500 and you pay $3,000 in debts (including the estimated mortgage payment), you’d calculate your DTI like this:
DTI = ($3,000 / $8,500) x 100 = 35.3%
This DTI is well within the acceptable range. Keeping your DTI low can improve your ability to qualify for better rates and loan terms. In most cases, a DTI below 36% is considered favorable, while 43% is the common upper limit for many types of mortgages.
How down payments impact the income needed for a $400k home
Your down payment directly affects how much you need to borrow; the higher your down payment, the lower your loan amount. That means smaller monthly mortgage payments and less interest paid over time.
Smaller down payments may help you buy sooner, but they also come with trade-offs, like higher monthly mortgage payments and the added cost of private mortgage insurance (PMI). Lenders typically require PMI when your down payment is under 20%, and the additional cost can significantly add to your minimum monthly fees.
Here’s how different down payment amounts might impact a $400,000 home purchase:
| Down Payment Percentage | Down Payment | Approximate Loan Amount | Estimated Monthly Payment* | PMI Required? |
|---|---|---|---|---|
| 20% | $80,000 | $320,000 | $2,640 | No |
| 15% | $60,000 | $340,000 | $2,800 | Possibly |
| 10% | $40,000 | $360,000 | $2,970 | Yes |
| 5% | $20,000 | $380,000 | $3,100 | Yes |
| 3% | $12,000 | $388,000 | $3,200 | Yes |
*For illustrative purposes only. Estimated monthly payments are not guarantees and will vary based on interest rates, your credit profile, location, and other factors. Calculations assume $253 in property taxes, $132 in homeowners insurance payments, $132 in HOA fees, and $100 in utilities on a 30-year loan with a 6.5% interest rate.
How interest rates affect home affordability
Your interest rate has the biggest impact on your monthly mortgage payment and your long-term borrowing costs. Even a seemingly small increase in rates can raise your monthly obligation by hundreds of dollars.
If your monthly payment rises, like in an adjusted rate mortgage, so does the required income for a $400k house. This can make it harder to qualify unless you adjust your loan size or increase your down payment.
Other key factors lenders use to determine how much you can afford include:
— Down payment: A higher down payment reduces your loan amount and monthly payment.
— Loan-to-value ratio (LTV): A lower LTV improves your risk profile and can result in better rates.
— Credit score: Higher credit scores lead to better interest rates.
— Type of mortgage: FHA loans, conventional loans, and VA loans have different requirements and benefits.
— Location-based costs: Property taxes and homeowners insurance vary by area.
— Closing costs: These upfront expenses include origination fees, title insurance, and land transfer tax.
Tips for affording a $400k mortgage
So, how can you afford a $400k house without breaking the bank? Here are some tips for saving money and landing the best mortgage deal you can get.
Shop around for lenders
Different lenders offer different rates, fees, and loan programs, so shopping around is essential. Try Better’s affordability calculator to estimate your costs and plan your budget accordingly.
...in as little as 3 minutes – no credit impact
Save for a larger down payment
Aim for at least 10–20% of the purchase price, which would be $40,000 to $80,000 on a $400k home. This will reduce your loan amount and lower your monthly mortgage payments.
Improve your credit score
A higher credit score can help you qualify for lower interest rates and better loan terms. Pay bills on time, reduce credit card balances, and avoid taking on new debts before applying.
Get pre-approved
A mortgage pre-approval process walks you through exactly how much you can afford. With Better, you can get pre-approved in as little as three minutes and see your actual loan eligibility based on your income, credit score, and debts.
Include all housing costs
Your mortgage payment is just one part of the total cost. Don’t forget to account for property taxes, homeowners insurance, PMI, utilities, and maintenance.
Talk to a professional
A mortgage advisor can help you run the numbers, explore loan programs, and determine what works best for your financial situation and goals.
Shop smarter with Better
Affording a $400k mortgage depends on more than just your income. Your debt, down payment, credit score, and interest rate all influence the size of loan you can comfortably take on and how smoothly the process goes.
Better lets you cut through the guesswork with a pre-approval that’s fast, free, and 100% online. In as little as three minutes, you’ll get a personalized estimate of what you can borrow, with no paperwork and no hidden fees.
Start your pre-approval now and find out how close you are to affording your dream home.
...in as little as 3 minutes – no credit impact
Frequently asked questions
What credit score do I need to buy a $400k house?
Most lenders look for a credit score of at least 620 for conventional loans, and FHA loans allow scores as low as 580. To get the most favorable mortgage rates and reduce costs like PMI, aim for a credit score of 740 or higher.
Are there other affordability factors to consider?
Yes. Beyond the purchase price, consider your area’s cost of living, local property taxes, homeowners insurance, and commuting or maintenance costs. A $400,000 home may look very different depending on location, so it’s critical to evaluate the full cost of homeownership in your specific market.