What a $400,000 home loan can cost at current rates

If you don’t have a large enough down payment, buying a home in the current market may require a mortgage of $400,000 or more.

The median price of an existing home is $417,500, according to the National Association of Realtors. For newly built homes, the average sale price is $494,400, based on the latest Federal Reserve Bank of St. Louis data.

That leaves prospective buyers with two big questions: what would a $400,000 mortgage cost each month, and is it affordable?

How much would a $400,000 mortgage cost monthly?

Here, the focus is on the amount borrowed, not the home’s full purchase price. For this example, assume the loan amount is $400,000.

There are several mortgage terms available, but the 30-year fixed-rate loan is the most common. Using that term, we can estimate the monthly cost of a $400,000 mortgage.

The national average rate for a 30-year fixed mortgage was 7.18%, according to Freddie Mac data.

Using the Redfin mortgage calculator, a $400,000 conforming loan at a 7.18% interest rate would produce a principal-and-interest payment of $2,735 per month.

But principal and interest are only part of the total monthly housing bill.

Other homeownership costs can add up quickly

Monthly homeownership expenses can also include homeowners insurance, mortgage insurance, and property taxes. Depending on the property, you may also need to budget for repairs and HOA dues.

These are often called the “hidden costs of homeownership.” They are not really hidden, but many first-time buyers fail to include them when estimating what they can afford.

Anyone evaluating a home purchase should account for all of these costs, since they can substantially raise the total monthly payment.

According to Zillow research, the typical American homeowner spends $1,380 a month on maintenance, property taxes, and insurance. Among the metros Zillow studied, maintenance was the biggest hidden expense in each one.

Adding that $1,380 to the $2,735 principal-and-interest payment brings the monthly cost of a $400,000 mortgage to $4,115.

That figure offers a useful estimate, but it is not universal. The actual amount will vary depending on your interest rate, property taxes, and other personal factors.

Can you truly afford a $400,000 mortgage?

The real question is whether that payment fits your budget comfortably. It is not enough to ask whether you can cover roughly $4,115 a month.

If housing expenses leave little room for saving, retirement contributions, or discretionary spending, you could become “house poor.” In that situation, too much of your income is tied up in homeownership, leaving you with little flexibility for other goals.

If a $400,000 mortgage would stretch your finances too far, consider a lower-priced home or down payment assistance that could reduce how much you need to borrow.

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