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.
We can help you if you’re looking to buy a home and are unsure of how much you must make to afford one. We did the math to determine how much money is needed in the United States to buy a $400,000 home. S.
Buying a house is a major life decision, and one of the biggest factors to consider is the down payment The down payment is the amount of money you pay upfront when you purchase a home It’s typically a percentage of the home’s purchase price, and it can vary depending on the type of mortgage you choose.
So how much money do you need to put down on a $400000 house? The answer depends on a few factors. including:
- The type of mortgage you choose: Different types of mortgages have different minimum down payment requirements. For example, conventional mortgages typically require a down payment of at least 3%, while FHA loans require a down payment of at least 3.5%.
- Your credit score: Your credit score can also affect the minimum down payment you need. For example, borrowers with higher credit scores may be able to qualify for a lower down payment.
- The location of the home: The location of the home can also affect the down payment you need. For example, homes in high-cost areas may require a larger down payment than homes in low-cost areas.
Here’s a breakdown of the minimum down payment requirements for a $400000 house, based on the type of mortgage:
- Conventional mortgage: 3% ($12,000)
- FHA loan: 3.5% ($14,000)
- VA loan: 0% ($0)
- USDA loan: 0% ($0)
Here are some additional things to keep in mind about down payments:
- You can put down more than the minimum: While the minimum down payment is 3% for a conventional mortgage, you can put down more if you want. Putting down more money can help you get a lower interest rate and save money on your monthly payments.
- You may need to pay private mortgage insurance (PMI): If you put down less than 20% on a conventional mortgage, you will likely need to pay PMI. PMI is an insurance policy that protects the lender in case you default on your mortgage.
- There are down payment assistance programs available: There are a number of down payment assistance programs available that can help you afford a down payment. These programs can provide you with a grant or a loan to help you cover the cost of your down payment.
Here are some tips for saving for a down payment:
- Create a budget and track your spending: The first step to saving for a down payment is to create a budget and track your spending. This will help you identify areas where you can cut back and save more money.
- Set a savings goal: Once you know how much you need to save for a down payment, set a savings goal. This will help you stay motivated and on track.
- Automate your savings: One of the best ways to save for a down payment is to automate your savings. This means setting up a regular transfer from your checking account to your savings account.
- Invest your savings: If you have a long time horizon, you may want to consider investing your savings. This can help you grow your money faster.
Here are some additional resources that can help you learn more about down payments:
- The Mortgage Reports: The Mortgage Reports is a website that provides information and resources about mortgages.
- Down Payment Resource Center: The Down Payment Resource Center is a website that provides information about down payment assistance programs.
- Fannie Mae: Fannie Mae is a government-sponsored enterprise that provides information about mortgages.
Additional Resources
- Down Payment Assistance Programs & Grants by State 2023: https://themortgagereports.com/82861/down-payment-assistance-programs-grants-state
- How Much Is the Down Payment for a $400,000 House?: https://themortgagereports.com/107713/down-payment-400000-house
- How Much Money Do I Need to Earn to Buy a $400,000 Home?: https://fortune.com/recommends/mortgages/how-much-salary-to-buy-400000-home/
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. However, the COVID-19 pandemic that began to spread in March 2020 created a perfect storm of market forces that increased home prices.
“The country sold more homes in 2021 than it had in the previous five years,” says Scott Bergmann, a Realty One agent. According to Bergmann, one of the main causes of the sharp increase in home prices was the historically low interest rates, which enticed more people to enter the housing 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. Bergmann continues, “That meant there was fierce competition among buyers for a home purchase, and many of them had to pay significantly over asking price in order to be the front-runner with home sellers.” 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—but they may be done climbing.
Although the Fed hasn’t yet stopped raising interest rates, many analysts predict that it will start lowering rates in 2024. However, senior mortgage loan originator Derek Amos of Mutual of Omaha Mortgage believes it’s extremely unlikely that mortgage rates will fall to 2021 levels.
It’s also critical to keep in mind that a home’s total cost consists of more than just the asking price. So be sure to take a holistic view of the upfront costs.
“There is more money that needs to be paid out of pocket when purchasing a home than just the down payment,” says Shelby McDaniels, Channel Director at Chase for Corporate Home Lending. For example, closing costs cover expenses such as appraisals, inspections, attorney fees, title insurance, and more. They are usually paid either in full or rolled into the loan amount, and typically range from 2% to 6% of the total amount.
According to McDaniels, it’s critical to collaborate with a local lender and agent who can clarify closing costs unique to your area. You won’t be able to proceed with buying the property if you are unable to cover the closing costs. “.
Can You Actually Afford a $400,000 Home?
FAQ
What should your income be for a $400000 house?
How much are payments on a 400k house?
What credit score do I need to buy a 400 000 house?
Can I afford a 400k house on 100k salary?
How much is a $400k house down payment?
You’ve just seen how widely the down payment for a $400K house can vary: from $0 to $80,000. So, you probably won’t be expecting a single figure for the monthly payment on such a home loan. And you’d be right.
What causes a $400k house to have a low down payment?
By far, the most common cause of variations in the minimum down payment for a $400K house is the type of mortgage you choose. Obtaining zero down payment mortgage loans can significantly enhance your affordability when it comes to purchasing a house. Those loans are:
How much Down do you need to buy a house?
The amount you’ll be required to put down may vary depending on the loan program you use to finance the home purchase. Government-backed loans like VA and USDA allow for down payments as low as 0%. On the other end of the spectrum, jumbo loans may require minimum down payments of 10% or more.
How do I get a $400k house with an FHA loan?
Have a minimum credit score of 580 (or 500 with a 10% down payment) Your minimum down payment for a $400K house with an FHA loan can be $14,000. Begin your FHA loan application process. Start here USDA loans are backed by the U.S. Department of Agriculture (USDA).