According to Insider calculations based on the latest data, the average borrower getting a mortgage in 2023 will have a monthly payment around $2,883 if they're getting a 30-year fixed-rate mortgage, and $3,759 on a 15-year fixed-rate mortgage. Is a $2,000 a month mortgage high?
For conventional loan applicants, the median monthly mortgage payment in October 2023 was $2,208, according to MBA data. For FHA loan applicants, the median monthly mortgage payment in October 2023 was $1,955, according to MBA data.
Key average mortgage debt insights
The average mortgage debt balance per household was $241,815 as of Q2 2023, a 4 percent increase from 2022. The average mortgage balance exceeds $1 million in 26 U.S. cities, including 18 cities in California.
If you make $70K a year, you can likely afford a home between $290,000 and $310,000*. Depending on your personal finances, that's a monthly house payment between $2,000 and $2,500. Keep in mind that figure will include your monthly mortgage payment, taxes, and insurance.
To purchase a $300K house, you may need to make between $50,000 and $74,500 a year. This is a rule of thumb, and the specific salary will vary depending on your credit score, debt-to-income ratio, type of home loan, loan term, and mortgage rate.
The bottom line
Sure, mortgage rates could fall to 3% at some point, but chances are that's not going to happen anytime soon. Moreover, waiting for rates to drop before you buy your home could backfire. Instead, consider buying your house now and refinancing your mortgage when rates improve.
At the start of 2023, economists predicted that mortgage rates would gradually decline throughout the year, but that forecast didn't come true. In fact, rates trended higher, reaching a new peak of 7.79% in late October, according to Freddie Mac.
Average 30-Year Fixed Rate
After hitting record-low territory in 2020 and 2021, mortgage rates climbed to a 23-year high in 2023. Many experts and industry authorities believe they will follow a downward trajectory into 2024.
“Most lenders follow the guideline that a borrower's housing payment (including principal, interest, taxes and insurance) should not be higher than 28 percent of their pre-tax monthly gross income,” says Winograd.
With rates at a 22-year high, the $3,000 monthly mortgage payment becomes the norm. In the face of spiking interest rates and historically high home prices, $3,000 monthly mortgage payments are common in today's housing market.
Lower your DTI
An optimal DTI is 36% or below, including possible housing costs, but excluding current rent payments, if any. If your monthly income is, for example, $5,000, then you shouldn't owe more than $1,800 per month. If your current debt is around $600 a month, your housing expenses can be $1,200.
Property Tax Changes
If a tax increase causes a shortfall in your account, your lender will cover the difference until your next escrow review. Following the review, your monthly payment will increase to cover the shortfall, and your lender will increase the tax estimate to ensure sufficient future coverage.
In its November 2023 Mortgage Finance Forecast, the Mortgage Bankers Association (MBA) anticipates 30-year rates starting in 2024 at 7.1% and gradually declining to 6.1% at the close of the year before dipping as low as 5.5% in 2025.
The ESR Group expects mortgage rates to decline in 2024, ending the year below 6 percent. The lower rate environment is expected to boost refinance volumes, which are already on the upswing, as evidenced by the recent uptick in Fannie Mae's Refinance Application-Level Index, to nearly double their 2023 levels in 2024.
Mortgage Bankers Association (MBA).
MBA's baseline forecast is for mortgage rates to end 2024 at 6.1% and reach 5.5% at the end of 2025 as Treasury rates decline and the spread narrows.
Basic Info. Effective Federal Funds Rate is at 5.33%, compared to 5.33% the previous market day and 4.58% last year. This is higher than the long term average of 4.60%.
On a salary of $36,000 per year, you can afford a house priced around $100,000-$110,000 with a monthly payment of just over $1,000. This assumes you have no other debts you're paying off, but also that you haven't been able to save much for a down payment.
What income is required for a 200k mortgage? To be approved for a $200,000 mortgage with a minimum down payment of 3.5 percent, you will need an approximate income of $62,000 annually.
Different types of mortgages also have different minimum credit score requirements. And that can be a barrier to an uber-low down payment if your score is low. However, the minimum down payment for a $400K house would be only $2,000 more for those with a score of 580 instead of 620.