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The average mortgage payment is declining. Here’s why

Aly J. Yale
The Mortgage Reports contributor

What’s the average mortgage payment?

The average mortgage payment is just over $1,500 per month, according to the U.S. Census Bureau.

That might seem like a high price to pay.

But believe it or not, average mortgage payments are almost equal to the cost of renting. National average rents clocked in at $1,476 in October.

Even better, mortgage payments are declining. They’re down by about 3% since mid-2018, and expected to fall even lower in 2020.

Want to see how low your mortgage payment could be? Find out here.

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Average mortgage payments by region

The decline in mortgage payments will, of course, vary by location. Census Bureau data shows homeowners in the Pacific Census division of the country (Washington, Oregon, California, Hawaii, Alaska) have the furthest to fall, with average monthly mortgage payments sitting around $2,100. 

Here’s how average mortgage payments look currently by state and Census division:

  • Pacific — $2,096 (Washington, Oregon, California, Hawaii, Alaska)
  • New England — $1,912 (Maine, New Hampshire, Vermont, Massachusetts, Connecticut, Rhode Island)
  • Middle Atlantic — $1,856 (New York, Pennsylvania, New Jersey)
  • Mountain— $1,439 (Montana, Idaho, Wyoming, Nevada, Utah, Colorado, Arizona, New Mexico)
  • South Atlantic — $1,437 (West Virginia, Maryland, Delaware, Washington D.C., Virginia, North Carolina, South Carolina, Georgia, Florida)
  • West South Central — $1,397 (Oklahoma, Arkansas, Louisiana, Texas)
  • West North Central — $1,321 (North Dakota, South Dakota, Nebraska, Kansas, Minnesota, Iowa, Missouri)
  • East North Central — $1,296 (Wisconsin, Michigan, Illinois, Indiana, Ohio)
  • East South Central — $1,140 (Kentucky, Tennessee, Mississippi, Alabama)

According to an analysis from HomeMuch.net, there’s also a stark difference in average mortgage payments by city.

In San Jose, California, for example, homeowners pay a whopping $4,008 in monthly mortgage costs. Those in Coffeyville, Kansas pay just $205. 

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Why the average mortgage payment is declining

According to property data firm CoreLogic, the typical mortgage payment is down nearly 3% over May 2018, despite rising home prices.

By May 2020, the firm expects payments to dip even more — anywhere between 3.3% to 5.9% below this year.

That’s thanks to predicted low interest rates, which have hovered around three-year lows for some time.

>> Related: Low rates mean big buying power. See how much home you can afford

According to CoreLogic’s findings, rates should average about 0.7 percentage points lower on 30-year, fixed-rate loans compared to last year.

That should lead to even steeper declines in average mortgage payments moving forward.

The caveat: “Average” mortgage payments don’t really matter 

It’s important to keep in mind that statistics are just broad, overall trends. The truth is, every mortgage payment is unique. Two homebuyers with identical properties can have very different payments, whether they’re across the country from each other or just down the street.

That’s because mortgage payments are based on a whole slew of factors that vary from one buyer to another. Here are just a few of the things that can make one homeowner’s mortgage payment different than the next:

  • Down payment size
  • Interest rate
  • Credit score
  • Debt-to-income ratio
  • Home price
  • Mortgage insurance requirements

Let’s take a look at an example. Say Buyer A and Buyer B are both buying a home in Austin, Texas. Both homes are priced at $300,000. Here’s how those payments could differ:

  Buyer A Buyer B
Home price $300,000 $300,000
Down payment  20% ($60,000) 10% ($30,000)
Credit score 760 600
Interest rate  3.75% 4.25%
Monthly payment  $1,100 $1,450

In this scenario, Buyer A has a stellar credit score of 760. She qualifies for a 3.75% interest rate as a result. And she makes a 20% down payment of $60,000. Not including property taxes and home insurance, she’d see a monthly mortgage payment of $1,111.

On the other hand, Buyer B has not-so-great credit (600). He qualifies for a 4.25% interest rate and puts down just 10% ($30,000). His mortgage payment would come out to $1,443 (including PMI, but not home insurance or property taxes).  

That’s a difference of $332 per month or $3,984 per year. Buyer B would also see significantly more paid in interest over the life of the loan.

How to lower your monthly mortgage payment

Mortgage payments are highly flexible. If you’re worried that your home purchase may result in a too-high monthly cost, there are quite a few ways to lower it and make homeownership more affordable.

You can:

To get a feel for what your average monthly mortgage payment could be, check out our mortgage calculator. To get personalized rate quotes, check out the vetted mortgage lenders below.

Check your mortgage payment today

Want to know how much a mortgage would cost you each month? You can get a general idea using our mortgage payment calculator.

Or, for the most accurate estimate, get a custom mortgage quote that includes your monthly payment. You can get started using the link below.

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