How much money you need to earn to afford a $400,000 home (2024)

Over the past few years, prospective homeowners have chased a moving target: homeownership.

The median sales price of houses sold in the U.S. stood at $417,700 in the fourth quarter of 2023—down from a peak of $479,500 in Q4 2022. But that drop hasn’t made homebuying much easier since mortgage rates remain high. As of April 8, 2024, the average 30-year fixed rate mortgage rate stands at 7.01%, according to Mortgage News Daily.

So, if you’re in the market for a house and wondering how much you need to earn to afford one, we’ve got your back. We crunched the numbers to find out how much you need to earn to afford a $400,000 home in the U.S.

The steep climb of home prices

The real estate sector has been on a wild ride over the past few years.

In the first quarter of 2020, the median sale price for a home stood at $329,000. But the emergence of the COVID-19 pandemic in March 2020 brought about a perfect storm of market forces that drove home prices upward.

“In 2021, the nation sold more homes than it had in the last five years,” says Scott Bergmann, an agent with Realty One. One of the biggest reasons home prices shot up so much, according to Bergmann, was record-low interest rates, which encouraged more buyers to jump into the homebuying market.

However, while demand increased, supply did not. Housing inventory became scarce as people held off on listing homes for sale while they sheltered in place. Plus, disruptions to the supply chain slowed new construction. “So that meant buyers were competing heavily for a home purchase, and a lot of buyers had to pay quite a bit over asking price in order to be the front-runner with home sellers,” Bergmann adds. In fact, offers of $50,000 or more over asking price became the norm.

How interest rates impact affordability

Interest rates are another major piece of the housing affordability puzzle. Since March 2022, the Fed has increased the federal funds rate 11 times. These rate hikes, in turn, have driven up the cost of consumer borrowing, including mortgages.

The most recent Fed rate hike was in July 2023, and placed the Fed’s target rate at 5.25% to 5.50%.

In March 2022, mortgage rates were still relatively low, averaging 4.67%. Today, however, rates are the highest they’ve been since the year 2000—butthey may be done climbing.

The Fed hasn't pumped the brakes on rate hikes just yet and many experts believe it will begin cutting rates in 2024. However, it’s highly unlikely mortgage rates will drop to 2021 levels, according to Derek Amos, senior mortgage loan originator with Mutual of Omaha Mortgage.

It's also important to remember that the cost of a home includes more than just a property’s sticker price. So be sure to take a holistic view of the upfront costs.

"Buying a home involves more money out-of-pocket than just the down payment,” says Shelby McDaniels, Channel Director for Corporate Home Lending at Chase. For example, closing costs cover expenses such as appraisals, inspections, attorney fees, title insurance, and more. They typically run between 2% and 6% of the loan amount, and are either paid up front or rolled into the loan.

“It’s important to work with an agent and lender in your local market who can provide clarity on closing costs specific to your market,” McDaniels says. “If you can’t pay for the closing costs, you won’t be able to move forward with purchasing the property."

How much do you need to make to afford a $400,000 home?

With all of these factors in mind, how much do you need to earn in order to reasonably afford a $400,000 home in the United States? Here’s how the math breaks down:

  • Purchase price: $400,000
  • Down payment: 7% ($28,000)
  • Loan term: 30 years
  • Loan interest rate: 7.01% (fixed)

Even though it’s often recommended that homebuyers put down at least 20% on a home purchase, the typical down payment for first-time homebuyers is closer to 7%. Keep in mind that when putting down less than 20% on a conventional mortgage, you’ll need to pay private mortgage insurance (PMI) until you accumulate 20% equity in the home.

Using our example, a 7% down payment on a $400,000 home would equal $28,000, so you would need to borrow $372,000. The monthly payments on a 30-year fixed rate mortgage for this amount would be about $3,057, including principal and interest, homeowners insurance, property taxes, and PMI.

Ideally, your mortgage payment shouldn’t take up more than 28% of your gross (pre-tax) income, according to Brian Walsh, a certified financial planner and senior manager of financial planning for SoFi, a fintech company.

That means you’d need to earn about $10,839 a month, or $130,068 per year, in order to afford a $400,000 home. Your actual take-home pay will depend on your state of residence, tax filing status, and other withholdings, Walsh says.

Of course, the 28% recommendation is just a guideline and may or may not be appropriate depending on your other financial commitments.

“If you have other major expenses such as debt payments or childcare, it may be a little more challenging to follow this rule of thumb,” explains Walsh.

The monthly mortgage payment on a $400,000 home can also vary significantly. For instance, your loan type (variable versus fixed rate), down payment amount, property taxes, homeowners insurance, and interest rate will all have an impact on your monthly payment.

The upshot? Walsh says to run the numbers based on your budget and unique circ*mstances. You can use a mortgage calculator to plug in your current income and monthly financial obligations to see exactly how much home you can afford.

“Borrowers will either need to have higher incomes or make larger down payments to keep their debt-to-income level reasonable,” Walsh says.

The takeaway

As the real estate market continues to evolve, so do the financial demands on home buyers. Saving up a larger down payment will be helpful in the current environment. But no matter how much money you bring to the closing table, make sure that your mortgage payment fits comfortably within your income and budget—before you sign on the dotted line.

How much money you need to earn to afford a $400,000 home (2024)


How much money you need to earn to afford a $400,000 home? ›

The annual salary needed to afford a $400,000 home is about $127,000. Over the past few years, prospective homeowners have chased a moving target: homeownership.

How much do I have to make to afford a 400K house? ›

To afford a $400,000 home, assuming a 20% down payment and a 6.5% interest rate on a 30-year mortgage, you would need a gross monthly income of approximately $7,786.55. This assumes you have $1,000 in monthly debt.

How much annual income to afford a 350k house? ›

Following the 28/36 rule, a guideline many mortgage lenders use to gauge how much you can afford, you'd likely need to earn at least $90,000 per year to afford a $350,000 house without spreading yourself too thin. Keep in mind that figure does not include upfront payments, like your down payment and closing costs.

How much monthly payment for a 400K mortgage? ›

For example, on a $400K mortgage with a 7% fixed rate, the monthly payment on a 15-year loan is $3,595. The payment on a 30-year loan, by comparison, is $2,661. Just keep in mind that neither amount factors in the cost of insurance or property taxes, which will both be included in your monthly payment.

How much house can I afford if I make $120 000 a year? ›

So, assuming you have enough to cover that down payment plus more left over for upkeep and emergencies — and also assuming your other monthly debts don't take you over that 36 percent figure — you should be able to afford a home of $470,000 on your salary.

Can I afford a 400k house making 70k a year? ›

How much income you need to buy a house in a specific price range largely depends on the type of loan you're applying for, where you live and other factors. For example, at current mortgage rates, borrowers with an FHA loan and a 10% down payment would need to earn about $70,000 a year to afford a $400,000 house.

Can I afford a 400k house on 100k salary? ›

Assuming you have a 5% down payment (which is what would be required for an FHA loan) and less than 6% in other debts per month (~$500) you could afford a $400,000 home on a $100,000 salary. This number could change substantially, however, depending on if you have a bigger down payment or less debt.

How much should you make a year for a $300000 house? ›

How Much Income Do You Need to Buy a $300,000 House? With a 5% down payment and an interest rate of 7.158% (the average at the time of writing), you will want to earn at least $6,644 per month – $79,728 per year – to buy a $300,000 house.

Can I afford a 350k house making 50k a year? ›

A person who makes $50,000 a year might be able to afford a house worth anywhere from $180,000 to nearly $300,000. That's because your annual salary isn't the only variable that determines your home buying budget. You also have to consider your credit score, current debts, mortgage rates, and many other factors.

How much house can I afford with a 1 million salary? ›

One rule of thumb is to aim for a home that costs about two-and-a-half times your gross annual salary. If you have significant credit card debt or other financial obligations like alimony or even an expensive hobby, then you may need to set your sights lower.

How much is a $1 million dollar mortgage per month? ›

How much is $1,000,000 mortgage a month? You can expect to spend around $6,653 a month with a 30-year mortgage term and $8,988 a month with a 15-year term. This assumes you have a 7% interest rate (and doesn't take into account property taxes, mortgage insurance, and property insurance).

How much is a 500k mortgage per month? ›

The monthly cost of a $500,000 mortgage is $3,360.16, assuming a 30-year loan term and a 7.1% interest rate. Over the course of a year, you would pay $40,321.92 in combined principal and interest payments.

How much is a 300k mortgage per month? ›

On a $300,000 mortgage with a 6% APR, you'd pay $2,531.57 per month on a 15-year loan and $1,798.65 on a 30-year loan, not including escrow. Escrow costs vary depending on your home's location, insurer, and other details.

How much house can I afford if I make $36,000 a year? ›

On a salary of $36,000 per year, you can afford a house priced around $100,000-$110,000 with a monthly payment of just over $1,000. This assumes you have no other debts you're paying off, but also that you haven't been able to save much for a down payment.

Can I afford a 500k house on 100k salary? ›

To afford a $500,000 house, you need to make a minimum of $91,008 a year — and probably more to make sure you're not house-poor and can afford day-to-day expenses, maintenance and other debt, like student loans or car payments. One good guideline to follow is not to spend more than 28 percent of your income on housing.

What is the 28/36 rule? ›

According to the 28/36 rule, you should spend no more than 28% of your gross monthly income on housing and no more than 36% on all debts. Housing costs can include: Your monthly mortgage payment. Homeowners Insurance.

How much do I need to make a year for a 300k house? ›

With a 5% down payment and an interest rate of 7.158% (the average at the time of writing), you will want to earn at least $6,644 per month – $79,728 per year – to buy a $300,000 house. This is based on an estimated monthly mortgage payment of $2,392.

How much house can I afford if I make $45000 a year? ›

On a salary of $45,000 per year, you can afford a house priced at around $120,000 with a monthly payment of $1,050 for a conventional home loan — that is, if you have no debt and can make a down payment. This number assumes a 6% interest rate.

What house can I afford on 60k a year? ›

Based on Bankrate's mortgage calculator, you should look for a home that costs $200,000. If you can afford a 20 percent down payment — $40,000 — your monthly principal and interest payment for that size mortgage loan will be $1,118.

Is 400k a high income? ›

What Is Considered Rich Today? Today, Joe Biden also believes anybody or any household making over $400,000 is rich. He has promised to raise taxes back to 39.7% from 37% for individuals making over $400,000 and married couples making over $450,000. W2 income-earners pay the most in taxes.

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