Here's how much money you need to make to afford a $400,000 home

MW Here's how much money you need to make to afford a $400,000 home

By Aarthi Swaminathan

The median price of an existing home hit an all-time high of $414,400 in 2025

Home prices inched up to a new record high to finish 2025. Buying a home in today's environment requires a lot more income than in years past.

Homeownership is a pillar of the American dream, but exactly how much money does one need to earn to afford it?

In recent years, the dream of homeownership has moved out of reach for many people in the U.S. Median home prices climbed to a new high of $414,400 in 2025 - even as relatively fewer people have bought and sold homes in recent years.

Borrowing costs have also stayed high, making buying a house expensive for aspiring homeowners. In contrast to pandemic-era mortgage rates that dipped below 3%, the average 30-year mortgage rate stayed over 6% for most of the past year, adding hundreds of dollars per month in interest costs to monthly payments.

Against this backdrop, how much money does a buyer need to make to afford a $414,400 home? Factoring in property taxes and homeowners' insurance, which have become increasingly costly line items on a homeowner's balance sheet, how does the math work out?

MarketWatch ran the numbers with real-estate platform Realtor.com. Here's what we found.

(Realtor.com is operated by News Corp subsidiary Move Inc.; MarketWatch publisher Dow Jones is also a subsidiary of News Corp.)

Buying a $414,400 home with a 30-year rate of 6.6%

Housing costs are generally considered affordable when they do not exceed 30% of one's gross monthly income.

Danielle Hale, chief economist at Realtor.com, said that keeping the principal and interest payment to 25% of one's income is one way to make sure there's also enough for taxes and home-insurance costs.

For a $414,400 house with a 6.6% mortgage, which was the annual average for 2025, the monthly principal and interest payment would be about $2,400. The figure assumes that the buyer is making a down payment of about 10% of the home's sale price.

When one factors in property taxes and insurance for a $414,400 home, a buyer is looking at a total monthly payment of nearly $3,000.

That would require a gross annual income of $118,800 if they were to keep their total housing costs at an affordable 30% of their income.

Buying a $414,400 home with a 30-year rate of 6.15%

With the current 30-year rate of 6.15% for a $414,400 home, a home buyer would pay about $2,300 for their monthly principal and interest payments.

And with a housing cost cutoff at 30% of their income after including taxes and insurance, they would need to make about $114,400 to afford the house.

The figures above assume that the buyer is not only putting down a payment of 10% of the home's sale price.

Buying a $414,400 home with an FHA loan and 3.5% down

The pros of doing this include a lower down payment. The cons include higher monthly payments.

If a buyer is using a mortgage backed by the Federal Housing Administration, which are often used by first-time buyers, the math changes.

FHA loans allow buyers to put down as little as 3.5% of a home's price.

So with a 30-year FHA loan at a rate of 6.6%, the monthly payment they would be looking at - including insurance and taxes - would be about $3,100, Realtor.com's Hale estimated.

To afford that, meaning that housing costs only comprise 30% of one's income, a buyer would need to make about $125,600 a year.

Buying the same house at a lower rate, such as 6.15%, would require an income of $120,900 to afford the $3,000 a month in principal, interest, taxes and insurance.

Buying a $414,400 home with a conventional loan and 20% down

The pros in this scenario include lower monthly payments; the cons include a higher down payment.

If a buyer is using a conventional loan and putting 20% down, that really helps them with the monthly payment.

A conventional 30-year mortgage on a $414,400 house at a 6.6% rate with a 20% down payment would cost a buyer about $2,700 a month, including insurance and taxes, Realtor.com's Hale estimated.

To afford that, meaning that housing costs only comprise 30% of one's income, a buyer would need to make about $108,200 a year.

At a lower rate, such as 6.15%, the necessary income would be $104,300 to cover $2,600 a month in principal, interest, taxes and insurance.

Buy now - or wait? Here are the key factors to consider

Mortgage rates have kicked off the year with a big drop from 6.2% on Jan. 2 to 6.07% on Jan. 14, according to Mortgage News Daily. But should buyers expect further declines?

Putting aside rate fluctuations in early January, "I expect mortgage rates to be fairly steady in 2026, especially relative to recent years," Realtor.com's Hale said.

The bigger challenge for buyers is finding the right house, not locking in a good rate.

"Even though the number of homes on the market is growing, buyers still often find it challenging to locate a home that meets their needs and is on-budget," she added, so "my advice is to lock in the mortgage once you've found the home that fits your needs and your budget."

Don't wait for the spring homebuying season to pick up before you start looking, another economist added.

Even though real-estate agents expect inventory to pick up then, "people are willing to buy at any point in the year now if they sense a good deal," Heather Long, chief economist at Navy Federal Credit Union, said in a statement.

Watch out for rising insurance and property-tax costs

In addition to a home's asking price, house hunters should pay close attention to the other ongoing costs of owning a home that can add up, especially property taxes and home insurance.

In 2025, non-mortgage costs such as insurance, utility bills and property taxes jumped 30% from the previous year, according to an analysis by real-estate company Cotality. "And there is little sign that this growth will slow down," they added.

Some lenders require homeowners to maintain an escrow account to manage taxes and insurance. Homeowners are paying an average of 45% more in escrow costs compared to five years ago, Cotality researchers found in a separate report.

Buyers in certain parts of the country that are more affordable in terms of home prices are more vulnerable to these payment spikes, the company noted.

For instance, while the Midwest and parts of the South have lower home prices, they have also experienced the biggest jumps in property taxes and insurance costs, Cotality said. Nebraskan homeowners, for instance, have seen a 53% increase in escrow costs in the past five years, the company noted, among the highest in the nation, due to rising home-insurance costs and property taxes.

"All across the Midwest, the amount paid toward insurance and property taxes is almost half of the monthly cost of owning a home," Cotality researchers said.

Cotality expects insurance premiums across the country to increase by 8% in 2026.

Don't stick with the lender you know - shop around

House hunters thinking of buying a house in 2026 should also be picky about their lender.

Shopping around and getting mortgage quotes from multiple lenders may be a slog, but it pays off in the long run. By shopping around and choosing the best offer, a homeowner could save up to $80,000 over the life of the 30-year mortgage - or about $2,700 a year, according to LendingTree (TREE).

It's also worth asking how much it would cost to refinance your mortgage, if that's something you're looking into doing down the line.

Some lenders offer free refinances with no closing costs as a way to keep your business. Some even offer a free loan-rate amendment, which brings down your interest rate without modifying any other parts of the mortgage. It's worth checking out different lenders, from local credit unions to mortgage giants, to see what options you have.

Take a test drive with your new housing payment

Realtor.com's Hale had one final tip for people budgeting to buy a house this year. If you know roughly what your new monthly housing costs will be, start adjusting your budget now.

"It's a good idea to test out the likely higher housing payment you'll eventually have to make by setting aside the amount above your current housing payment," she suggested.

"Not only does this give you a reality check for your budget, it helps you build up a stock of savings that can be used for moving expenses," Hale said.

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-Aarthi Swaminathan

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January 15, 2026 08:00 ET (13:00 GMT)

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