Introduction to down payments
The median sales price of an existing home in America reached $394,300 in September 2023. What does that mean for home buyers’ savings plans? Just how much do you need for the down payment for a $400K house?
The minimum could be anything between $0 and $80,000. The amount depends on the mortgage you qualify for and choose.
But before we dig deeper into the dollar amounts, let’s answer another question: What is a down payment? It’s the cash sum you contribute from your savings on closing day.
You may be able to top up your savings with help from family or a down payment assistance program to get to your minimum requirement. You’ll find more on that topic below.Check your low down payment eligibility. Start here
In this article (Skip to...)
- Down payment requirements
- Minimum down payment amounts
- Mortgage types and down payments
- Down payment assistance programs
- Monthly payment for a $400k house
- Home affordability FAQ
Down payment requirements for a $400K house
From your lender’s point of view, a down payment is about your having skin in the game. The bigger your down payment, the more likely you are to keep up your monthly mortgage payments and fight to keep your home if times get tough. Of course, that means the lender’s risk of making a loss on your loan is smaller than it is with less-invested borrowers.Check your low down payment eligibility. Start here
Your lender will most likely reward you with a lower mortgage rate the bigger your down payment is, all other things being equal. So, perhaps your down payment for a $400K home should be as much as you can comfortably afford.
And that might be 0%, 3%, or 3.5% of the home’s price if you’re a first-time buyer struggling to get on the bottom rung of the homeownership ladder. Or it might be 80% or 90% if you owned your last home for ages and made a considerable profit from it.
Types of mortgages
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:
- VA loans — Available only to veterans, service members, and people in a few closely related groups
- USDA loans — Open only to those on moderate or low incomes who are buying in designated rural areas
Different types of mortgages also have different minimum credit score requirements. And that can be a barrier to an uber-low down payment if your score is low. However, the minimum down payment for a $400K house would be only $2,000 more for those with a score of 580 instead of 620.
Still, there are other advantages to having a higher credit score. So, next, let’s explore the pros and cons of different low-down-payment mortgages.
What’s the minimum amount you can put down with different mortgage types?
Before you can usefully compare different types of low-down-payment mortgages, you need to know a bit about mortgage insurance. Listen to our podcast for the full lowdown.
But, briefly, anyone who makes a down payment smaller than 20% of the home’s purchase price must pay monthly private mortgage insurance premiums. The sole exception is for those with VA loans, which don’t do continuing mortgage insurance.Verify your home buying eligibility. Start here
If you get a “conforming loan,” which conforms to Fannie Mae and Freddie Mac’s rules, you can stop paying your premiums when your mortgage balance dips to 80% of your home’s market value. In fact, your loan servicer will automatically cancel your PMI once the balance reaches 78 percent of the original value.
If you opt for an FHA loan and put at least 10% down, your mortgage insurance may be eligible to drop off completely at year eleven. However, in the case of USDA loans, you’re stuck with mortgage insurance for the lifetime of your loan. And you’ll have to sell the home or refinance the mortgage to escape it before you finish paying down this loan type.
Take mortgage insurance seriously. With a conforming loan, for example, your premiums on a $400,000 mortgage could be between $200 and $500 a month.
You’ll discover the premium you’ll pay in the loan estimates (quotes) you’ll receive from lenders when you comparison shop for your mortgage. In the next section, we’ll go over the different types of low-down-payment mortgages.
Different mortgage types and the minimum down payment for a $400K house for each
Most borrowers who are eligible for these loans should think twice before choosing another. They:
- Require zero down payment
- Often have the lowest mortgage rates of all 30-year mortgages
- Charge no continuing mortgage insurance (but see the one-time funding fee)
- Allow you to roll up your closing costs in the loan amount
- Have no pre-set credit score threshold. However, most lenders want minimums of 620 or even 640
If you are in an eligible military-related group and can overcome that credit score obstacle, you’re in an excellent position to buy a home. Your down payment for a $400K house with a VA loan can be $0.Check your VA loan eligibility. Start here
If the federal government isn’t backing (partly guaranteeing) a loan, it’s called a conventional mortgage. Conforming loans count among these and have different standards.
But conventional mortgage loans:
- Require a minimum down payment of 3% of the home’s sale price
- Tend to have much lower mortgage rates than most
- Require no upfront mortgage insurance for down payments of at least 20%
- Have no set minimum credit score but most lenders will probably be looking for 620+
Your minimum down payment for a $400K house with a pure conventional loan can be $80,000. However, read about piggyback loans, which may get you many of the advantages of a 20% down payment if you’ve only saved 10%.Check your conventional loan eligibility. Start here
- Require a minimum down payment of 3% of the home’s sale price
- Have competitive rather than low interest rates
- Require mortgage insurance but only for as long as the home value exceeds your mortgage balance by less than 20%. After that, you can stop paying
- Set a minimum credit score of 620
Your minimum down payment for a $400K house with a conforming loan can be as low as $12,000.
These FHA loans are backed by the government in the form of the Federal Housing Administration (FHA). They’re popular with first-time home buyers with credit scores in the 580-619 range. They:
- Require a minimum down payment of 3.5% of the home’s sale price
- May have lower mortgage rates than other loans
- Bring mortgage insurance premiums that can make them more costly overall than most other loans. And unless you make a down payment of 10% or higher, you’re stuck with that mortgage insurance until you sell or refinance
- 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). And, as mentioned above, they’re designed for people with moderate and low incomes who wish to buy a home in an area designated as rural.
Many places that aren’t obviously urban count as rural: a whopping 98% of the U.S. land area, according to the USDA’s website. USDA loans:
- Require zero down payment
- Have typically below-market mortgage rates
- Charge mortgage insurance premiums at a reduced rate
- Don’t have a pre-set credit score but most lenders require 620+
Your down payment for a $400K house with a USDA loan can be $0.Verify your USDA loan eligibility. Start here
Should I make a 20% down payment for a $400k house?
That’s a question only you can answer. Will a 20% down payment cause you financial pain? If so, how much pain are you willing to endure to get the benefits such a down payment brings?
Because those benefits are considerable:
- You’ll be borrowing less so your total cost of borrowing will be lower
- Your large down payment might well earn you a lower mortgage rate
- A smaller loan amount at a lower interest rate means lower monthly payments
- You wholly escape costly mortgage insurance
So, if you can comfortably afford a 20% down payment, you should probably make one.
Down payment assistance programs
There are thousands of down payment assistance programs across the country. And every one is dedicated to providing financial help to home buyers.
Many focus on first-time buyers and people on low-to-moderate incomes. But some are open to all.Check your low down payment eligibility. Start here
You could be in line from one of these for an outright grant, a low-interest loan, or a zero-interest forgivable loan. These are available based on the zip code you live in. Check out some of your options in Down Payment Assistance Programs & Grants by State 2023.
Of course, you may be able to get help from other sources, such as your seller. And your family may want to chip in with a gift toward your down payment. Don’t think you need to hide these from your lender. There will be some rules to follow but such arrangements are perfectly legitimate.
What's the monthly payment for a $400k house?
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. Not only will different borrowers qualify for various mortgage rates and types of mortgages, but those rates themselves move up and down all the time — until you lock one.Verify your home buying eligibility. Start here
We can show you a quick and easy way to estimate your monthly payment on a $400K house (or on any home price).
Just go to our home page and scroll down to our suite of mortgage tools. You’ll find mortgage calculators for VA, FHA, and USDA loans, as well as one for conventional mortgages.
Open any or all of them and model your personal options. Choose your state and input the figures that apply to your circumstances, including that day’s mortgage rate for the type(s) of mortgage loan you’re considering.
The mortgage calculator will tell you your likely monthly mortgage payment. You’ll get only a rough guide and must wait for your mortgage quotes for more accurate figures. But you’ll likely be in the right ballpark.Time to make a move? Let us find the right mortgage for you
Home affordability FAQ
You’ll need a down payment of $12,000, or 3 percent, if you’re buying a $400K house with a conventional loan. Meanwhile, an FHA loan requires a slightly higher down payment of $14,000, equivalent to 3.5 percent of the purchase price. Home buyers using either a VA loan or a USDA loan can qualify for a mortgage with zero down payment on a $400K home.
You’ll likely need to make about $111,000 a year to buy a $400K house. This is an estimate, but, as a rule of thumb, with a 3 percent down payment on a conventional 30-year mortgage at 7 percent, your monthly mortgage payment will be around $2,600. Keep in mind this figure doesn’t include home insurance or housing expenses. Also, your home buying budget will vary depending on your credit score, debt-to-income ratio, type of loan, mortgage term, and interest rate.
A $400K home with 3 percent down at a 7% interest rate for 30 years would cost approximately $2,600 per month. Keep in mind that this is an estimate, and your actual monthly payment may vary depending on your specific loan terms and any additional costs such as property taxes and insurance.
The credit score needed to buy a house with no down payment can vary depending on the type of loan and lender. For VA loans, there’s no strict minimum, but a credit score of at least 620 is often preferred. USDA loans may not have an official minimum requirement, but a score of 640 or higher is recommended. FHA loans, which require a small down payment, may accept borrowers with scores as low as 580. Conventional loans typically require a down payment, so they are not considered “no down payment” loans.
A good rule of thumb is that you shouldn’t spend more than 28 percent of your gross monthly income on housing costs and no more than 36 percent on total debts, including your mortgage and credit card payments. For example, if you earn $5,000 in pre-tax income and have $300 in debt repayment, then your mortgage payment shouldn’t exceed $1,500. This financial principle is commonly known as the 28/36 rule.