In July, the national median payment that purchase applicants applied for dropped from $2,172 in June to $2,127, indicating an improvement in homebuyer affordability. This is in line with the Mortgage Bankers Association’s (MBA) Purchase Applications Payment Index (PAPI), which uses information from the MBA Weekly Applications Survey (WAS) to calculate how new monthly mortgage payments change over time in relation to income.
“Affordability conditions have now improved for two consecutive months, the result of lower mortgage rates and continued strong income growth,” said Edward Seiler, MBA’s Associate VP of Housing Economics and Executive Director, for the Research Institute for Housing America. “MBA is forecasting that mortgage rates will remain in the 6.5% to 7% range for the rest of 2025. While still elevated, continued income growth and softening home-price gains should boost prospective buyers’ purchasing power in the months ahead.”
The mortgage payment-to-income ratio (PIR) is larger when the MBA’s PAPI rises, which is a sign of weakening borrower affordability conditions. This can be caused by rising mortgage rates, growing application loan amounts, or a decline in earnings. When loan application amounts, mortgage rates, or incomes decline, the PAPI declines, which is a sign of improving borrower affordability conditions.
Additional Key Findings of the PAPI — July 2025
- The national median mortgage payment was $2,127 in July 2025 — down $45 from June. It was down by $13 from one year ago, equal to a 0.6% decrease.
- The national median mortgage payment for FHA loan applicants was $1,865 in July, down from $1, 881 in June but up from $1,838 in July 2024.
- The national median mortgage payment for conventional loan applicants was $2,160, down from $2,205 in June but up from $2,140 in July 2024.
- The top five states with the highest PAPI were: Nevada (248.9), Idaho (247.0), Arizona (219.7), Utah (204.7), and Florida (202.3).
- The top five states with the lowest PAPI were: Louisiana (114.4), D.C. (118.1), New York (124.9), Alaska (125.0), and Connecticut (126.4).
- Homebuyer affordability increased for Black households, with the national PAPI decreasing from 163.1 in June to 158.2 in July.
- Homebuyer affordability increased for Hispanic households, with the national PAPI decreasing from 152.4 in June to 147.8 in July.
- Homebuyer affordability increased for White households, with the national PAPI decreasing from 164.8 in June to 159.8 in July.
In July, the national PAPI dropped an estimated 3.0% from June’s 163.7 to 158.7. The PAPI is down (affordability is higher) 4.1% annually due to the notable earnings rise, even if median earnings were up 3.7% from a year ago and payments fell 0.6%.
Additionally, for borrowers looking for lower-payment mortgages (the 25th percentile), the national mortgage payment declined to $1,468 in July from $1,500 in June.
When comparing mortgage payments for home purchases to rents, MBA’s national mortgage payment to rent ratio (MPRR) dropped from 1.48 at the end of the first quarter (March 2025) to 1.45 at the end of Q2 (June 2025). In Q2 of 2025, the Housing Vacancy Survey (HVS) national median asking rent—as reported by the Census Bureau—rose to $1,494 ($1,468 in Q1 of 2025). In June 2025, the ratio of the median asking rent to the 25th percentile mortgage application payment dropped to 1.00 from 1.02 in March 2025.
The median mortgage payment for purchase mortgages from MBA’s Builder Application Survey dropped from $2,273 in June to $2,233 in July, according to the Builders’ Purchase Application Payment Index (BPAPI).
Note: The MBA’s Purchase Applications Payment Index (PAPI) measures how new mortgage payments vary across time relative to income. Higher index values indicate that the mortgage payment to income ratio (PIR) is higher than in a month where the index is lower. Contrary to other affordability indexes that make multiple assumptions about mortgage underwriting criteria to estimate mortgage payment level, PAPI directly uses MBA’s Weekly Applications Survey (WAS) data to calculate mortgage payments.
To read the full methodology, click here.
