What Is the Down Payment on a $400k House?
The median US home price has spent the past few years hovering right above $400,000, leading many prospective buyers to wonder precisely what it takes to get into such a property.
So, what is the down payment on a $400k house? Some buyers may be able to purchase a $400k home with no money down. Most borrowers, however, will be looking at between 3% and 5% of the purchase price – a down payment of $12,000 to $20,000.
What’s the Down Payment on a $400k House?
The size of the down payment you'll need to buy a $400k house varies depending on the type of loan that you apply for. There are "no money down" mortgages available, but not all buyers and properties will qualify.
First-time and lower-income homebuyers have some conventional options for 3% down. In comparison, FHA loans are available for 3.5% down with no first-time buyer or income restrictions.
Existing homeowners and buyers who don't meet the requirements for a low-income loan can qualify for a conventional mortgage with just 5% down. However, many opt for 20% to eliminate PMI and reduce their monthly payments.
Loan Type | Minimum Down Payment (%) | Minimum Down Payment ($) |
0% | $0 | |
0% | $0 | |
3% | $12,000 | |
3% | $12,000 | |
3.5% | $14,000 | |
5% | $20,000 | |
20% | $80,000 |
VA Loan – 0% Down
Minimum Down Payment (%): 0%
Minimum Down Payment on a $400k House ($): Zero Down Payment
Minimum Credit Score: 580 to 620
VA loans are backed by the US Department of Veterans Affairs. You must qualify for a VA Certificate of Eligibility, available to active and former service members and some surviving spouses. Homebuyers who qualify will find that VA loans have some of the lowest interest rates on the market.
While VA-backed home loans don’t require mortgage insurance, you may be required to pay a VA funding fee. The funding fee, typically financed into the loan, ranges from 2.15% to 3.3% of your total loan. Borrowers with service-related disabilities may be eligible for a fee waiver.
USDA Loan – 0% Down
Minimum Down Payment (%): 0%
Minimum Down Payment on a $400k House ($): Zero Down Payment
Minimum Credit Score: 580 to 620
The US Department of Agriculture offers USDA loans to promote homeownership in rural areas for low and moderate-income buyers. Income limits vary by region and the number of occupants in your home, but you’ll generally need to make no more than 115% of your area’s median income – about $110,000 per year in most areas.
As a type of government-backed mortgage, interest rates are typically low for USDA loans. Mortgage insurance is technically not required, but you do have to pay an upfront “guarantee fee” of 1% and an annual fee of 0.35% of your total loan.
It’s important to note that the maximum size of a USDA loan in most areas of the country may be well under $400,000 due to income and debt-to-income ratio limits, so you may need to put money down if you’re purchasing a $400k house with a USDA mortgage.
Check your USDA loan eligibility with a lender here.
Conventional 97/HomeOne Loan – 3% Down
Minimum Down Payment (%): 3%
Minimum Down Payment on a $400k House ($): $12,000
Minimum Credit Score: 620
The Conventional 97 and HomeOne loan programs are available when at least one borrower is a first-time homebuyer. There are no income limits when qualifying for these mortgages. However, borrowers who make 100% or less of their area's median income (120% in high-cost areas) are eligible for lower interest rates.
You’ll need to meet standard conventional loan guidelines when applying for a Conventional 97 or HomeOne mortgage, and borrowers putting less than 20% down will still be on the hook for private mortgage insurance (PMI).
HomeReady/Home Possible Loan – 3% Down
Minimum Down Payment (%): 3%
Minimum Down Payment on a $400k House ($): $12,000
Minimum Credit Score: 620
HomeReady and Home Possible loans are designed for low-earning buyers who make less than 80% of their area’s median income. You do not need to be a first-time homebuyer to participate in these programs.
PMI costs are lower with HomeReady and Home Possible mortgages than with other comparable conventional loans. Plus, qualifying borrowers are eligible for rate reductions, which can further lower your monthly payment.
FHA Loan – 3.5% Down
Minimum Down Payment (%): 3.5%
Minimum Down Payment on a $400k House ($): $14,000
Minimum Credit Score: 580
FHA mortgages are insured by the Federal Housing Administration and targeted toward borrowers who may not qualify for a standard conventional loan.
Interest rates are often lower on government-backed FHA loans than with conventional, although all FHA mortgages require you to pay a mortgage insurance premium (MIP) that persists for the life of your loan. This includes an upfront MIP of 1.75% and an annual MIP of 0.55%.
Considering these fees, FHA loans sometimes have a higher APR than similar conventional mortgages. However, borrowers with a lower credit score and small down payment will likely still find savings.
Conventional Loan – 5% Down
Minimum Down Payment (%): 5%
Minimum Down Payment on a $400k House ($): $20,000
Minimum Credit Score: 620
Borrowers who are not first-time homebuyers and exceed the limits for a low-income mortgage can get a standard conventional loan with as little as 5% down. You will still be responsible for mortgage insurance, but unlike with an FHA loan, you can cancel it once you reach 20% equity ownership in your property.
Conventional Loan – 20% Down
Minimum Down Payment (%): 20%
Minimum Down Payment on a $400k House ($): $80,000
Minimum Credit Score: 620
Suppose you can put 20% down on your $400k home and are otherwise able to qualify for a conventional loan. In that case, you'll probably get some of the lowest monthly payments available – apart from perhaps a VA mortgage.
That's because with 20% down, you won't need to carry private mortgage insurance, and you're likely to qualify for better rates.
How much could you save on a $400k home by putting 20% down and eliminating PMI?
According to insurance provider MGIC, PMI would run around $120 per month for a borrower with a credit score of 760 who takes out a 30-year mortgage for a $400k house with 5% down.
However, for a borrower with a credit score of 650, the same mortgage insurance would cost over $420 monthly. If you're going conventional with a lower credit score, you may save big by putting together a 20% down payment.
Closing Costs & Other Expenses
Unfortunately, there are more costs associated with buying a $400k house than just making a down payment. In reality, you may need a substantial amount above and beyond your down payment to cover closing costs and escrow accounts.
Expenses will vary depending on the type of mortgage you get, although conventional loan closing costs typically run 2% to 4% of your total balance. This translates to an estimate of between $8,000 and $16,000 for a $400k home. If you're taking out one of the 3% down loans, this could effectively double the amount of funds you'll need to have available.
Some of the things you’ll be responsible for paying at closing include:
Lender origination fees
Title insurance
Appraisal costs
Discount points
Prepayment of property taxes and insurance
Ways to Reduce Closing Costs
Thankfully, several strategies can help alleviate the burden of paying for closing costs if you're already struggling to put together a sizable down payment.
Seller Concessions
Seller concessions are credits that a property seller agrees to give to you at closing. While a seller could grant concessions in any scenario, you're more likely to find them in a buyers' market or with properties that are more difficult to sell.
You can use seller concessions to cover your closing costs – including lender discount points – but they cannot be applied towards your down payment or to satisfy any required reserves.
Lender Credits
Some lenders may be willing to offer you lender credits – funds that can be used for your closing costs – in exchange for charging a slightly higher interest rate on your mortgage. Lender credits are the opposite of discount points.
You can't use lender credits for your down payment or required reserves. Still, they can be an excellent tool for freeing up cash that you’d otherwise need to spend on the fees associated with closing.
Down Payment Gifts
Lenders will typically allow you to use funds gifted to you from a family member or other related individual to cover the costs of purchasing a home. These gifts can be applied to your closing costs or down payment and can even be used to satisfy required reserves.
Down payment gifts differ from gifts of equity, which involve a relative gifting you a portion of the home’s equity in lieu of cash. A gift of equity can count toward your down payment.
Down Payment Assistance Programs
Over 1,600 down payment assistance (DPA) programs across the United States actively work to help borrowers put more towards their homes than they initially thought possible. DPA can also help you save your cash for emergencies after closing or to act as reserve funds to increase your chance of being approved for a mortgage.
Most loan types allow you to use DPA, and in some cases, it could let you buy a 400k home with no money out of pocket.
Most down payment assistance programs are locally based, with many operated by governmental agencies and area-specific organizations. Since each program is different, there are no universal DPA requirements. However, nearly two-thirds want you to be a first-time homebuyer.
Similarly, almost three-quarters of down payment assistance programs have income limits, although 27% allow applicants of any earning level to qualify.
What Size Down Payment Do You Need for a $400k Home?
It's possible to purchase a $400k home with zero money down, but most buyers will need somewhere between $12,000 and $20,000 – plus closing costs. To find out what low down payment loans you qualify for and how the amount you put down could affect your monthly costs, check today's rates and begin the application process with a trusted mortgage lender.
Tim Lucas is the editor and Lead Analyst for MortgageResearch.com. Tim spent 11 years in the mortgage industry and now leverages that real-world knowledge to give consumers reliable, actionable advice. He has been featured in national publications such as Time, U.S. News, MSN, The Mortgage Reports, and more.
