Mortgage Payments Fall for Third Straight Month as August Affordability Improves

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The typical mortgage payment sought by homebuyers declined again in August, offering a modest measure of relief even as borrowing costs remained a major obstacle to affordability.

The median monthly payment for purchase-mortgage applicants fell to $2,162 from $2,175 in July, according to the Mortgage Bankers Association’s latest Purchase Applications Payment Index. The decline marked a third consecutive monthly improvement in the payment measure.

MBA’s national PAPI fell 0.6% to 154.3 from 155.2 in July. A lower index indicates improving affordability because mortgage payments are consuming a smaller share of borrower income.

The improvement was modest, not a return to inexpensive housing finance. MBA’s data show payments were still 2.9% higher than a year earlier. Household earnings rose 4.1% over the same period, however, leaving the affordability index 1.1% lower than a year ago.

Smaller loan amounts did some of the work

According to MBA, the decline in the median purchase loan amount helped offset higher mortgage rates during August. That distinction matters: a falling payment does not necessarily mean financing itself became cheaper. Buyers can also lower monthly obligations by borrowing less, whether because home prices soften, they make larger down payments or they purchase less expensive homes.

The lower-payment segment of the market also improved. The median payment at the 25th percentile fell to $1,492 from $1,512 in July.

FHA borrowers saw a larger monthly decline. Their median payment fell to $1,856 from $1,901 in July and was slightly below the $1,863 level from August 2025. Conventional borrowers moved the other direction: their median payment rose to $2,188 from $2,184 in July and $2,112 a year earlier.

Affordability remains highly uneven

MBA reported that 27 states experienced declining affordability during August. Idaho had the highest state PAPI at 258.6, followed by Nevada at 229.8, Rhode Island at 213.7, Arizona at 204.0 and Tennessee at 193.5.

The District of Columbia had the lowest reading at 113.9, followed by Louisiana at 114.2, West Virginia at 120.8, Connecticut at 124.5 and New York at 125.3.

MBA’s household demographic indices all improved from July. The PAPI for Black households fell to 154.9, the Hispanic-household index declined to 142.7 and the white-household index fell to 157.0.

New-home borrowers did not get the same relief

MBA’s Builders’ Purchase Application Payment Index moved slightly higher. The median payment for purchase mortgages in MBA’s Builder Application Survey increased to $2,214 in August from $2,210 in July.

That divergence is useful alongside today’s government report showing new-home sales increased in August while new-home prices remained under pressure. It reinforces how sensitive today’s market is to the exact mix of loan size, property price, borrower income and mortgage rate.

The affordability picture is therefore improving at the margin, not fundamentally repaired. Sustained relief would require some combination of lower mortgage rates, slower home-price growth, stronger income growth or buyers taking on smaller loan balances.