What’s The Mortgage Payment On A $400K Loan?

According to the Federal Reserve Bank of St. Louis, the median sales price of homes sold in the U.S. was $431,000 as of Q3 2023. This means a mortgage of around $400,000 is likely in the cards for many people looking to buy a house in 2024. If you’re ready or almost ready to begin house hunting, plugging in $400,000 as a tentative mortgage amount can give you an idea of how much money you should put down and how large your mortgage payments might be.

Let’s take a look at the typical monthly payment on a $400K mortgage and the factors that will impact your payment amount as you embark on the journey of buying a house and paying off your loan. 

Your monthly mortgage payment will be made up of four parts: principal, interest, taxes and insurance (PITI). For purposes of our calculations, we’ll be focusing on principal and interest, but keep this in mind: The total amount you’ll pay in principal and interest each month can vary significantly depending on your interest rate and the length of your loan term. It’s time now to delve into how both of these factors, along with other factors, impact a $400,000 mortgage payment.  

How Term Length Impacts A $400K Mortgage

Simply put, the shorter your mortgage term length, the higher your mortgage payment will be each month. That’s because you’ll have less time to pay off the total principal balance and you’ll have to do so in significantly fewer payments. 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.

Consider, too, that although you’ll pay more each month with a 15-year mortgage than you’d pay monthly with a 30-year mortgage, you’re likely to have a lower interest rate on the 15-year plan since rates tend to be lower on shorter-term mortgages. For example, with all other factors being equal, the interest rate on a 30-year $400,000 loan might be 7.9%, while the rate on a 15-year loan for the same amount might be 6.9%.

How Interest Rate Impacts A $400K Mortgage

As already noted, another factor that will impact your monthly mortgage payment on a $400K loan is the interest rate you qualify for. The higher the interest rate, the higher your monthly payment. Sticking with the example in the section above, a 30-year $400K mortgage at a 7% interest rate would have a monthly payment of $2,661. Meanwhile, the same 30-year $400K mortgage at a 7.5% interest rate would have a monthly payment of $2,797, taxes and insurance not included.

Adjustable-Rate Mortgages

While the aforementioned examples use a fixed-rate mortgage for simplicity, it’s possible that you could choose an adjustable-rate mortgage. With this option, home buyers have an introductory rate for an agreed-upon time period after which their interest rate can go up, down or both, depending on how the market fluctuates over time.

What Determines Your Mortgage Rate?

Your interest rate is determined not only by your term length, but by other factors that include market interest rates, your credit score, your loan-to-value ratio, your down payment and the loan program of your choosing. Your interest rate will also be affected by your individual lender, so be sure to compare rate quotes from different lenders to see who’ll provide you with your best option.

Additional Costs To Consider

As mentioned, in addition to the principal and interest associated with your mortgage, you’ll have to factor some other costs into your monthly mortgage payment. Specifically, many lenders require that you pay into an escrow account every month to cover the cost of homeowners insurance and property taxes. And, if you’re taking out a conventional loan but putting down less than 20%, you’ll need to pay private mortgage insurance – leading to an even higher monthly payment.

If you live in a home connected to a homeowners association (HOA), you’ll also have to pay monthly or yearly HOA dues for various amenities that the HOA provides to residents of the neighborhood. Like interest rate, loan term, insurance costs and property taxes, HOA dues can affect the affordability of a $400K mortgage.

To give you a better idea of how loan term and interest rate impact the monthly mortgage payment on a $400,000 loan, here’s a chart that’s easy to digest. Remember, the payment amounts listed below exclude property taxes and insurance.

Here’s a sample amortization schedule on a $400K mortgage. For this particular example, we’re using a 30-year fixed-rate mortgage with an interest rate of 7%. Remember, this just includes the cost of the principal and interest. Other expenses, such as homeowners insurance and property taxes, haven’t been accounted for.

When you take out a mortgage, the monthly payment amount isn’t the only cost you should be mindful of. In addition, you’ll need to have cash on hand to cover your down payment and closing costs. Because these numbers are a percentage of the home’s purchase price and loan amount, respectively, they’ll be greater for a $400K mortgage than they would be for a less expensive home.

Now that you know more about the finances involved with getting a $400K mortgage, let’s take a closer look at what the home loan process actually looks like:

1. Ensure you meet the requirements. The first step in getting a $400K mortgage is knowing the requirements. The exact qualifications vary based on lender and loan type. With a conventional mortgage, for example, you’ll typically need a credit score of at least 620 and a debt-to-income ratio (DTI) of no more than 50%. Depending on the lender and their requirements, you may need a DTI of well under 50%, however.
2. Choose a mortgage lender. After you’ve reviewed the requirements for a $400K mortgage, you’ll need to find a lender. Consider shopping around to see who’ll give you the most favorable interest rate and loan term.
3. Get preapproved for a $400K mortgage. Getting mortgage preapproval, otherwise known as initial mortgage approval, early on in the home buying process lets you know exactly how much home you can afford so that you can shop accordingly. A preapproval will also strengthen your offer on a home by showing the seller you’re a serious buyer who’s all but 100% guaranteed of having the financing to back up your offer – as long as your offer is less than or equal to the amount you’re preapproved for.
4. Find a house and make an offer. Once you have your initial mortgage approval – or preapproval – letter in hand, you’ll be able to go house hunting and put in an offer as soon as you find the right property.
5. Get your inspection and appraisal. After your offer has been accepted, you’ll likely want to get a home inspection so you can be fully aware of the property’s condition. In most cases, your lender will also require you to get a home appraisal so they can be assured they’re not lending you more money than the house is worth.
6. Complete underwriting. Finally, your mortgage loan will go through a process known as underwriting where your lender will verify all the information you’ve provided them, including your income, assets, debts and property details. At this point, the lender may ask for additional information as well. This is the stage where your loan receives final approval, is denied or is suspended due to missing information.
7. Close on your new home. Once you’ve completed underwriting and your loan has been approved, it’s time to begin the closing process on your home. After your lender says you’re clear to close, you’ll receive a Closing Disclosure that will provide you with all the details of your loan and tell you how much money you’ll need to bring with you on closing day – which is the day you’ll sign closing papers, transfer money to the closing attorney, and pay all of your closing costs.

Finally, find answers to frequently asked questions about $400K mortgages.

How much should I make to afford a $400K mortgage?

The exact amount you need to make to afford a $400K mortgage depends on the interest rate, loan term and escrow costs associated with your loan – all of which impact your monthly payment amount. The 28% rule states that no more than 28% of your gross monthly income should go toward your housing payment, which includes not just principal and interest but also homeowners insurance and property taxes.

What down payment is needed for a $400K house?

The answer to this depends on your mortgage loan type and whether you’re looking to avoid paying private mortgage insurance (PMI). A 5% down payment on a $400,000 home comes out to $20,000, while 20% down – the amount required to avoid paying PMI on a conventional loan – is $80,000.

How can I get approved for a $400K mortgage?

To get approved for a $400k mortgage, you’ll need to meet your lender’s requirements for credit score, debt-to-income ratio and income. You’ll also typically need to have some cash set aside to cover both your down payment and closing costs, although two popular mortgage loan options – the USDA loan and VA loan – don’t require a down payment. To qualify for either a USDA loan or VA loan, though, you’ll need to meet very specific requirements.

With the average home price in the U.S. eclipsing $400K, an increasing number of home buyers is in need of a $400K mortgage. Before you move forward with your home purchase, it’s important to understand roughly how much your mortgage payment would be, as well as the factors that impact that amount. Once you’re armed with this information, you can feel more confident in your home buying decision.

Ready to get started? Apply for your initial mortgage approval today.