Brokers have important role to protect customers from themselves
Housing affordability challenges have been a topic of much discussion in the mortgage industry over the last few years.
The latest survey from LendingTree showed that even though the average principal and interest payment dropped last year, affordability challenges continue to squeeze borrowers.
The average amount paid in principal and interest fell 2.4% in 2025 to $1,942. It was $1,990 in 2024. However, that only paints part of the picture.
Borrowers are spending 20% of their income on average on principal and interest, but nearly 1 in 4 borrowers are spending at least 30% of their income.
Matt Schulz (pictured top), chief consumer finance analyst at LendingTree, said the fact that these payments are a growing part of the household budget is a warning sign. In addition, the fact that this doesn’t count escrow items like property taxes, insurance, and HOA fees should present a flashing red light to the industry.
“It’s still really, really hard for a lot of Americans to afford a house,” Schulz told Mortgage Professional America. “Yeah, the typical mortgage payment went down a little bit. And yeah, there’s a significant variation depending on where you live in the country. But by and large, affordability is still a really big issue. That’s not exactly breaking news.
“The other thing to keep in mind with this report is that even the numbers are high. And this is just principal and interest and not taxes, insurance, or HOA fees. As daunting as the numbers in this report may be, the reality is actually even more difficult for an awful lot of people.”
Wages not keeping up
The highest new mortgage payments are, unsurprisingly, on the West Coast. The highest average payments can be found in San Jose at $4,016. It is followed by San Francisco ($3,850), Oxnard ($3,401), Los Angeles ($3,366), and San Diego ($3,225). And again, this doesn’t include escrow.
In total, 10.2% of all borrowers spend at least 40% of their income on new mortgage principal and interest payments.
“If you look at the map of the places with the highest share of people spending 40% or more on their new mortgage payments, it is the big cities in California and booming areas in Utah and Idaho, and places where the economy is growing, and housing prices are growing, and incomes are growing,” Schulz said. “But looking at that, it seems pretty clear that in at least a lot of those places, incomes just aren’t keeping up with how fast housing prices are rising. And that’s a really difficult situation.”
It’s not just home costs that are getting more expensive, but everyday items as well. If mortgage payments continue to make up a larger portion of the household budget, it’s going to leave homeowners in a difficult situation.
“It’s just further proof of how challenging it is for an awful lot of Americans to afford a home,” Schulz said. “It’s something that so many Americans want to do and still do, even if they can’t afford it. Then, when you factor in just the prices of other essential things like groceries and gas rising, it just all adds to a really challenging situation. And it’s important that people ruthlessly prioritize what they want to spend on, especially if they want to buy a house.”
Readjusting expectations
Schulz noted that social media and television shows have given first-time homebuyers a warped sense of what a starter home looks like. He said it’s up to brokers to try to refocus those buyers on places they can afford.
“You see House Hunters and shows like that all the time, where people are talking about getting their first house and wanting it to be everything that it could be,” he said. “And I think, certainly for young people and people just getting started, what some of this drives home is the importance of maybe taking a smaller first step than maybe you wish you would, and understanding that first home probably isn’t a forever home and certainly not your dream home.”
Homebuyers need to work with brokers to really crunch the numbers and understand not just the maximum they can get approved for, but what actually lets them live the kind of life they want to live without being completely pushed to the maximum limit of their budget.
“I always tend to kind of preach kind of personal responsibility and the importance of taking the time to run at least basic numbers of affordability through affordability calculators and that sort of thing before you really get serious looking for that loan,” Schulz said. “There’s real risk to lenders as well. This whole process works better when everybody has a clear picture of what people can really afford. And you can have that kind of conversation, it makes it easier on both sides.”
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