Purchase Application Payment Index Down, Affordability Up

Homebuyers who applied for purchase loans in August paid an average of $83 less than those in July, a sign that affordability is improving.

According to the Mortgage Bankers Association's (MBA) Purchase Applications Payment Index (PAPI), the national median payment for purchase applicants decreased from $2,140 to $2,057 in one month. It was down by $113 from one year prior, equal to a 5.2% decrease.

“Homebuyer affordability conditions improved for the fourth consecutive month, with lower mortgage rates, rising incomes, and slower home-price growth giving prospective buyers’ budgets a much-needed boost,” said MBA’s Associate Vice President, Housing Economics Edward Seiler, who also serves as executive director of the Research Institute for Housing America. “MBA expects that lower mortgage rates, coupled with increasing housing inventory, will entice additional homebuyers to enter the housing market.”

Indicative of improving borrower affordability conditions, the MBA’s PAPI decreased from 167.2 in July to 160.7 in August. Median earnings were up 3.2% compared to one year ago, pulling the PAPI down 8.2% on an annual basis. 

For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment decreased to $1,388 in August from $1,444 in July.  

The national median mortgage payment for FHA loan applicants was $1,817 in August, down from $1,838 in July and down from $1,909 in August 2023.

The national median mortgage payment for conventional loan applicants was $2,056, down from $2,140 in July and down from $2,187 in August 2023.

Affordability continued to improve into September, as housing payments made their sharpest drop in four years leading up to last week's interest rate cut by the Federal Reserve.