The Income You Need to Buy a $400,000 Home (2026)

The question how much do you need to make to buy a house has a clean answer, and most people don't like it. It's a formula lenders run in about four seconds, and for the median American home it produces a number roughly $30,000 above what the median American household earns. Below is the whole calculation, in the order an underwriter would run it.

What rule do lenders actually use?

Two ratios decide almost everything.

The front-end ratio caps housing costs at about 28% of gross monthly income. Housing costs mean the full payment: principal, interest, property taxes, and homeowner's insurance (together, PITI), plus mortgage insurance and HOA dues if they apply.

The back-end ratio caps all monthly debt at about 36% of gross income. Car payment, student loans, credit card minimums, and the mortgage all count. Programs vary and some allow higher ratios, but 28/36 is the benchmark the industry built itself around.

Both use gross income, not take-home. That matters. Your budget lives on net pay; the loan approval lives on gross.

What does the median home actually cost per month?

Start with the price. The median U.S. home sold for roughly $400,000 in 2024 (NAR). Put 20% down and you finance $320,000.

At a 30-year fixed rate near 6.75%, close to where Freddie Mac's average sat through 2024, principal and interest run about $2,075 a month.

Then add what buyers forget. Property taxes and homeowner's insurance commonly add several hundred dollars a month, and insurance has climbed hard in storm-exposed and wildfire-exposed states. Call the all-in payment roughly $2,500 to $2,600.

Divide $2,600 by 0.28 and you get $9,285 in required gross monthly income — about $111,000 a year.

How far short is the typical household?

Median household income is about $80,000 (U.S. Census, 2023). The median home needs something near $110,000.

That leaves a gap of roughly $30,000 a year. Skipping vacations does not close it. The middle of the income distribution sits about 27% short of the middle of the housing market.

This is the arithmetic behind the price-to-income ratio doubling to about 5x. In the 1980s a home ran two to three times household income and the required-income number sat comfortably below what a normal job paid. The two lines crossed sometime in the last two decades and never uncrossed.

Does a smaller down payment help or hurt?

It helps you start. It hurts the number.

Author's calculation. Lower down payments add private mortgage insurance, included in the monthly estimates above.

The trade cuts both ways. Save the full 20% and you spend years you don't have while prices move. Put down 3.5% and you need roughly $29,000 more in annual income than the 20%-down buyer, because you finance more money and pay insurance for the privilege.

Congress designed low-down-payment programs to widen access, and they do, but only for buyers whose income already clears a higher bar. That leaves out the households that need the help most.

What does the rate do to the number?

More than almost anything else in the calculation.

The same $320,000 loan at 3% carries a principal-and-interest payment near $1,350. At 6.75% it runs about $2,075. Same house, same price, same buyer, $725 a month apart, or roughly $31,000 a year in required gross income.

A buyer who qualified in 2021 can fail today without their income changing by a dollar or the house changing at all. The sticker price never had to move. The financing did.

Where does this number get worse?

Two places. At the bottom of the wage scale it stops being a gap and becomes an order of magnitude. A full-time job at $7.25 an hour pays $15,080 a year, which supports roughly $350 a month in housing under the 28% rule. The entire calculation is in whether you can buy a house on $7.25 an hour — the supported loan lands near $50,000, and no state's market is anywhere near it. For the workers who once used manufactured housing as the affordable path, that door narrowed too, for reasons laid out in what happened to mobile home affordability.

At the top of the price scale it gets absurd. A $110,000 income requirement is the national figure. In high-cost markets the median home runs two to three times the national median, pushing the required income past $200,000 and in some places past $280,000. Those markets and what a normal job actually buys in each are mapped in the cities where a normal job no longer buys a home.

The number nobody set on purpose

No one legislated a $110,000 income requirement for homeownership. It emerged from three things: a decade of underbuilding after 2008 that left a shortage in the millions of units, wages that barely moved after inflation while productivity climbed (Economic Policy Institute), and a rate environment that added several hundred dollars to every monthly payment in the country.

None of the three were coordinated and all pushed the same way. The result: the median household gets disqualified from the median house by the median lender using the median formula. A market that stopped including most of the people in it is not a market correcting, and the same pattern runs through every other line of the broken American Dream ledger.

Closing the gap takes both ends at once: build enough homes to slow the price, and lift the wages that have to reach it. We are doing neither at the scale the arithmetic demands.