If you’re looking to a $400,000 home, you’re probably asking yourself. The income required for a $400,000 mortgage can be several factors, including down payment, DTI, credit score, and even location.
Whether you’re hunting a Boston, Massachusetts condo or looking for a home in Phoenix, Arizona, understanding how it affects affordability can help you plan wisely. In this Redfin guide, we will analyze the numbers, factors and tips that will help you buy a $400,000 home that works for your budget.
Most buyers need to make between $100,000 and $135,000 a year to buy a $400,000 home. This assumes an average interest rate, standard loan term, and a modest down payment. Actual income needs may vary based on your debt, credit score, and monthly expenses.
How much does it cost to a $400,000 home?
The general guidelines are that your monthly total housing expenses should not exceed 28% to 31% of your monthly income. These costs typically include mortgage payments (principal and interest), property taxes, homeowner insurance, and HOA fees.
To estimate the income required for a $400,000 home, property taxes and premiums vary from region to region, so you need to consider your upfront amount, lending interest rate, credit score, debt score, DTI), and location.
Example scenario
Let’s assume the following:
Home Price: $400,000 Down Payment: 20% ($80,000) Loan: $30,000 for 30 years term with interest of 6.5% Monthly Fee: ~$2,522 (including mortgage, taxes and insurance)
Estimated monthly mortgage payments (principal + interest): ~$2,022
Total estimated monthly housing expenses: $2,022 + $400 + $100 = $2,522
Therefore, in this scenario, you would need to earn around $108,000 a year to provide a comfortable home for $400,000 while you’re staying within the recommended housing cost limits.
Please note that if you beat less than 20%, you will likely need to pay Private Mortgage Insurance (PMI), which will increase your monthly expenses. If your property taxes are high, you will need to earn even higher incomes to qualify.
Now, let’s take a closer look.
Important factors that affect the amount of home you can afford
Salaries aren’t the only income you need for a $400,000 mortgage. Some personal and financial variables can affect your ability to qualify for a loan and the amount approved.
1. down payment
Using a larger down payment will reduce the amount you need to borrow and lower your monthly mortgage payments. You can also avoid paying private mortgage insurance (PMI) if you beat at least 20%. This is the monthly cost that most lenders will need if their down payment is below that threshold. .
2. Debt to Income Ratio (DTI)
The Debt-to-Income Ratio (DTI) compares monthly total debt payments, including student loans, car loans, credit card minimums, and other obligations, to monthly total income. Most lenders prefer DTIs of 43% or less, but many aim for less than 36% for more favorable loan terms.
Even if you earn high income, lenders can be hesitant to approve a big mortgage, as high DTI suggests you already have a significant amount of debt.
3. interest rate
Mortgage interest rates directly affect affordability. Even a 1% difference could change your monthly payment by a few hundred dollars.
For example, in a $400,000 home that has dropped by 20%, a 6% interest rate could mean paying around $2,400 a month, while a 7% interest rate could increase to around $2,650. An increase of $250. That extra cost means you need a higher qualification income.
As of June 2025, the average 30-year fixed interest rate was around 7%, which is higher than the rate seen in previous years.
4. Credit score
A credit score is a three-digit number that indicates that you are managing your debts based on your payment history, credit usage, and credit type. The score helps you determine interest rates and overall loan eligibility. Usually, a higher score gives you better terms.
Over 740: Highly qualified for excellent credit, best rates 620-739: Accepted by most lenders, but the rate may be below 620. Without a larger down payment or compensation factor, approval may be difficult
Lenders consider a higher score as less risky, allowing them to improve their borrowing ability even when income is at the bottom.
Read >>How to buy a home with poor trust
5. Location and property tax
Taxes vary greatly depending on where you purchase. In some counties, such as West County, New York and Cook County, Illinois, annual property taxes can exceed $7,000 for homes worth $400,000. In other regions, such as Maricopa County, Arizona and Bexar County, Texas, taxes may be under $3,000.
6. Other financial obligations
Regular obligations such as child support, compensation, and personal loans are included in the DTI, reducing the amount you can spend on a mortgage.
Ongoing costs such as property taxes, homeowner insurance and potential HOA fees should also be considered.
These need to be factored into affordable calculations.
What you need to buy a $400,000 home: Scenarios in line
The ability to provide a $400,000 home depends on several key factors: down payment, credit score, mortgage rate, and existing debt. Below is a comparison of three buyer profiles to show how these variables affect monthly costs and income required.
Buyer Profile Down Payment Credit Score Rate Debt Debt (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 Price $750-$3,250 (including PMI) ~ $125,000
Pro Tip: Talk to a mortgage lender early on can help you estimate affordable prices based on your financial situation. You can also unlock better fees and down payment assistance programs.
Helpful tips for purchasing a $400,000 mortgage
Here are some practical steps to improve your purchasing ability and make monthly payments easier to manage.
Improve your credit score: Paying bills on time, reducing your credit card balance, and avoiding new debt will increase your score and qualify for better mortgage term. Paying off existing debts: Lower your DTI by paying off a credit card or small loan will help you qualify for a higher mortgage amount. Compare multiple lenders: Rates and rates may vary significantly. Shopping around gives you a clearer picture of what you can afford. Use a joint load: Adding a spouse or partner with income (and good credit) can qualify for a larger loan. Explore Home Buyer Assistance Programs: Some states and local governments offer grants or favorable loan terms to first-time home buyers. Get Pre-Approval Early: Pre-Approval provides a clear budget and indicates to the seller that you are a serious buyer.
Read >> What you need to buy a house in 2025
FAQS: Answered a $400,000 mortgage question
1. What happens if the DTI is 43%?
You may still qualify for a mortgage, but you may face stricter loan terms or higher interest rates. If you’re close to the 43% threshold, consider reducing or consolidating your debt before applying for a mortgage.
2. How can I calculate a house I can afford?
To calculate affordable prices, use the 28/36 rule. The rules suggest that housing costs remain below 28% of total monthly income and below 28% of debt payments of less than 36%. Online mortgage calculators can help you plug in your income, debt, interest rates, down payments and estimate your price range.
3. Should HOA fees be included in the affordable price estimate?
yes. HOA fees are considered part of the total housing expenses and are included in DTI calculations by most lenders.
4. How will the 5% down payment change?
Monthly mortgage payments will be higher and you will need to pay a PMI. This will qualify for the required income.
5.Where can I find a $400,000 home?
Use Redfin’s Home Search tool to explore a list of target areas. You can set up a price filter, view tax estimates, and get new lists or alerts for price drops.
Future plans will pay off
Offering a $400,000 home doesn’t just mean earning a specific income. With smart budgeting, manageable debt, and expert guidance, the revenue required for a $400,000 mortgage is within reach. If you’re wondering how to buy a home in 2025, start by understanding your financial situation and exploring your loan options early.
Mortgage Advisors can help simplify the process by breaking down the types of loans, improving applications, and identifying loan programs that meet your goals. Having the right support makes a huge difference in finding a home that truly works for you.
