Why is my location wrong on find my iPhone ?

A possible reason for an incorrect location is explained in the section titled, "The first time that you sign in with your Apple ID on a new device" by clicking on the link for the support article 'Two-factor authentication for Apple ID' --> Two-factor authentication for Apple ID - Apple Support

"The notification might include a map of the approximate location of the sign-in attempt. This location is based on the new device's IP address and might reflect the network that it's connected to, rather than the exact physical location."

If you're connecting with wifi and not cellular, and the Internet service provider has their headquarters in another location, it may report the service provider's location and not where you are located.

Yes, unless you have some way to improve it. You say nothing about the equipment you are using. If you are using a mobile device you can make sure GPS and location sharing are turned on so it will use that. If you are using a computer it has no GPS and has to rely upon ISP information which cna be far off depending upon how your ISP set it up.

Do I keep using the location that puts me 400 miles from my location and two states from where I live?