Income Needed for a 400k Mortgage

Many home buyers are shopping in the $400k range and are wondering whether their income is high enough to qualify for the mortgage. This seems to be a common price range and fits within the FHA loan limits for every county in the US.

In this article, we will explain what your income will need to be to afford a $400k mortgage and what variables will impact your ability to qualify.

Contact us here to see whether you can qualify for a $400k mortgage without a credit pull.

How Much Income Do I Need for a 400k Mortgage?

The income needed for a $400k mortgage is from $67k to $78k per year depending upon which mortgage program you select, other debt, taxes and HOA fees.

Each mortgage program has a different down payment requirement and some have a PMI requirement while others do not. When you have PMI, it means your income may need to be higher to afford a 400k mortgage because you need to overcome that monthly PMI payment.

There are multiple programs you can apply for to qualify for a $400k mortgage. FHA, Conventional, VA and USDA require full income documentation. There are other options with larger down payment requirements but without income verification to may qualifying much easier.

This income needed for a $400k mortgage chart below shows the differences between mortgage programs, down payment, DTI requirement, and how much income is needed for each with no other debt.

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                            *Income needed for a $400k mortgage chart

Loan Type Down Payment % DTI % Income Needed
Conventional 20% 45% $77,000
FHA 3.5% 56.9% $67,000
VA 0% 41-50% $69,000
USDA 0% 41-44% $78,000

The data in the income needed for a $400k mortgage chart is based upon the following assumptions:

  • Tax rate of 1.5%
  • Homeowner’s insurance premium of $1000 per year
  • Interest rate of 5.5%
  • No other outstanding debt or monthly payments on your credit report

Please note that a 20% down payment for a conventional loan is not required, but eliminating the PMI by putting down 20% results in a lower annual income needed to qualify for a $400k mortgage.

There are some important things to consider when trying to qualify for a 400k mortgage no matter what your income is.

First, the annual taxes for the home you are shopping for will play a major role in how much income is needed for a $400k mortgage. The higher the taxes, the more you will need to earn to qualify. This is something you need to pay close attention to when thinking about your payment budget.

Therefore, if you are able to shop for homes where the taxes are lower, then you do not need as much income to qualify for a $400k house.

Next, if you are buying a home or a condo that has an HOA (homeowner’s association) fee, that also means you will need to earn more to qualify. Homeowner’s association fees really do eat into how much you can qualify for.

In some instances, you may need to make 30% more just to afford a home or a condo that has an association fee.

Finally, the loan program that you choose really will matter. You can see in the chart that you do not need as high of an income if you are applying for a $400k FHA loan. Although all FHA loans have a monthly mortgage insurance payment, the allowable DTI is much higher which means you can afford more.

How to Qualify for a $400k Mortgage

Before completing a loan application, think about what budget or payment you are comfortable with. Next, see what you savings you have for a down payment and closing costs.

The loan officer will go through various qualification requirements including employment, job stability, your savings, and credit report. You will need to supply 30 days of check stubs, two months bank statements, 2 years of W2’s and 2 years of tax returns.

Your loan package will then be sent to underwriting for a final loan approval.

If you would like to see how much you can qualify for, use our Home Affordability Calculator to help determine that for you. The calculator will take your current income, debt, future home taxes and insurance to provide a simple estimate for you.

First time home buyers often need someone to help guide them through the process of purchasing a home or even getting pre-qualified. You should speak with a loan officer well before you meet with a realtor to tour homes.

One of our partner lender can have initial discussions with you see where you stand in qualifying for a mortgage and to determine if anything such as credit scores or down payment needs to be worked on.

Frequently Asked Questions

What factors do lenders consider when assessing income for a $400,000 mortgage?
Lenders will look at your income, debt, proposed taxes and insurance for the property, and current interest rates when determining whether you can qualify for a $400k mortgage.

Are there specific debt-to-income ratios that need to be met?
The debt to income ratios will vary based upon the loan program and the lender. FHA loans for example will allow up to a 56.9% DTI with good credit.

Can I include my spouse’s income when calculating the income needed for a $400,000 mortgage?
You can include your spouses income but it must be fully documented.

Do lenders have different criteria for different types of mortgages?
Lenders may have different criteria for other mortgages that may not require income documentation.

How does credit score affect the income requirements for a $400,000 mortgage?
Credit scores impact the income needed because your scores determine the interest rate offered. The lower the rate, the less income you would need to qualify.

Can I use rental income as part of my qualifying income?
You can use rental income as part of your qualifying income if that rental income is reflected on your tax returns. You would also need to include any mortgage, tax and insurance payments for the rental property on the debt side of your application.

Are there any specialized loan programs that have different income requirements?
There are stated income loans which do not require you to prove your income.

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