Mortgage Payments Drop as Buyer Affordability Sees Welcome Boost in June

In a hopeful sign for aspiring homeowners, the median monthly mortgage payment applied for by U.S. homebuyers declined in June, marking a modest improvement in housing affordability nationwide. According to the latest Mortgage Bankers Association (MBA) Purchase Applications Payment Index (PAPI), the national median mortgage payment dropped to $2,172, down from $2,211 in May.

This drop though small is an encouraging shift for buyers navigating a market weighed down by high mortgage rates and record-level home prices.

“Affordability conditions improved in June, a positive sign for prospective homebuyers looking to take advantage of slightly lower mortgage rates and moderating home prices,” said Edward Seiler, MBA’s Associate Vice President of Housing Economics.

Seiler also noted that the median loan application amount fell to $324,800, suggesting buyers are adjusting their expectations and budget in response to broader market shifts. With more housing inventory gradually entering the market, especially in mid-tier price points, the pressure on pricing may continue to ease through the second half of the year.

🔍 Key Findings from the June 2025 PAPI Report

• National Median Payment: $2,172 (↓ $39 from May; ↑ $5 YoY)
• FHA Borrowers: Median payment was $1,881 (↓ from $1,927 in May, ↓ from $1,907 YoY)
• Conventional Loan Borrowers: Median payment was $2,205 (↓ from $2,235 in May; ↑ from $2,180 YoY)
• Low-Payment Borrowers (25th Percentile): Median payment dropped from $1,512 to $1,500

These figures represent an important shift: slightly lower mortgage payments combined with rising wages are beginning to tip the affordability scales even if only slightly.

🏘️ State-by-State Breakdown: Who’s Paying the Most?

According to the June index, the five states with the highest mortgage payment burdens relative to income were:

1. Idaho – PAPI: 255.7
2. Nevada – PAPI: 249.5
3. Arizona – PAPI: 219.2
4. Rhode Island – PAPI: 206.9
5. Utah – PAPI: 202.8

These regions are experiencing particularly high home prices relative to income, often due to population influxes and limited housing supply.

Conversely, the most affordable regions, based on lower PAPI scores, were:

1. Louisiana – PAPI: 116.9
2. Washington, D.C. – PAPI: 120.4
3. Connecticut – PAPI: 129.3
4. West Virginia – PAPI: 129.3
5. Alaska – PAPI: 129.4

📉 Affordability Improves Across Demographics

The report also revealed encouraging trends in affordability across racial and ethnic groups:

• Black households: PAPI fell from 166.1 in May to 163.1
• Hispanic households: PAPI dropped from 155.2 to 152.4
• White households: PAPI declined from 167.8 to 164.8

This indicates that affordability gains, though modest, are beginning to touch a broader cross-section of U.S. homebuyers.

📊 What Is the PAPI and Why Does It Matter?

The Purchase Applications Payment Index (PAPI) reflects the ratio of mortgage payments to income

the higher the score, the less affordable homeownership becomes. A falling PAPI means that borrowers are devoting a smaller portion of their monthly income to mortgage payments, typically due to lower rates, smaller loan amounts, or income gains.

In June, the national PAPI fell 1.8% to 163.7, its lowest level in months. This shift comes as median household incomes rose 4.6% year-over-year, helping to counteract the affordability crunch that has defined much of the past two years.

🔨 Builder Market Also Sees Payment Drop

For new homes, affordability is improving too. The Builder Applications Payment Index (BPAPI), which tracks mortgage payments for new-construction loans, showed a decrease as well. The median payment dropped from $2,328 in May to $2,273 in June a $55 improvement month-over-month.

This suggests builders may be offering incentives or pricing homes more competitively to attract buyers in a tighter market.

🧠 Bottom Line: A Window of Opportunity?

While housing costs remain historically high and mortgage rates are still hovering around 7%, June’s data offers a sliver of good news. With payments easing slightly and wages on the rise, many buyers may finally feel like they’re regaining a bit of leverage especially as inventory builds and sellers grow more flexible.

If mortgage rates stabilize or dip later in 2025, affordability could improve even further. In the meantime, today’s buyers may benefit from shopping strategically, locking in manageable payments, and avoiding the bidding wars that dominated much of the pandemic-era market. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.