The median monthly mortgage payment for U.S. homeowners is $1,030 according to the latest American Housing Survey from the U.S. Census Bureau. That’s up slightly from 2011 when the average American paid $1,015. The survey, most recently updated in 2015, includes taxes and insurance as part of a complete monthly payment. The average loan payment for principal and interest only was $853 per month.
A monthly mortgage payment is primarily based on three factors:
- The loan amount
- The interest rate on your loan
- The term, or number of years until the loan is paid off using the scheduled payment
With that information, it’s easy to calculate the monthly payment required to pay principal and interest on a loan. But homeowners might have to pay additional monthly expenses that are not directly related to the loan. For example, the following costs often get included in calculations for average mortgage payments:
- Property taxes
- Homeowners insurance
- Private mortgage insurance (PMI)
Who Is Average?
Nobody is average, so it’s helpful to look at the details to truly understand average monthly mortgage payments. For starters, the U.S. Census Bureau reports the median payment, which is technically not the same as the average. Averages can get skewed by extremes, but the median tells you where the middle is for a broad range of homeowners, and is arguably more useful than an average.
National averages: Information from the National Association of Realtors may help paint a more nuanced picture. The 2017 National Profile of Home Buyers and Sellers shows a national median purchase price of $235,000 and a median down payment of 10 percent of the purchase price. With that information, we can arrive at a loan size of $211,500.
Applying current mortgage loan rates, we can calculate the following average monthly mortgage payments:
- $1,022 per month on a 30-year fixed-rate loan at 4.10 percent
- $1,505 per month on a 15-year fixed-rate loan at 3.43 percent
First-time home buyers: The national averages include all homeowners, including those who have built up equity, worked their way up the pay scale, and established high credit scores. Those individuals are more likely to take on larger loans—and get approved for them. But first-time homebuyers typically have fewer resources available, and they buy less-expensive homes. According to the National Association of Realtors, first-timers bought houses valued at $182,500 and made 5 percent down payments. Given that information, the payments would be:
- $838 per month on a 30-year fixed-rate loan at 4.10 percent
- $1,233 per month on a 15-year fixed-rate loan at 3.43 percent
However, roughly one in five first-time home buyers made a down payment of more than 20 percent. That larger down payment helps bring down monthly mortgage payments substantially. Assuming a 20 percent down payment, the numbers would change to:
- $708 per month on a 30-year fixed-rate loan at 4.10 percent
- $1,042 per month on a 15-year fixed-rate loan at 3.43 percent
Cash flow for those buyers would improve by $130 per month on 30-year loans and $191 per month on 15-year loans.
Housing markets: The numbers above look at national median home prices. But your monthly mortgage payment will depend on the specifics of the market you buy in. On the coasts and in cities, homes are typically more expensive. In Middle America, houses cost less. So, comparing your payment to a national average mortgage payment might not provide useful information.
For example, Zillow reports that the median home price in San Diego, California is $586,000—far more than the national median. Even with a 20 percent down payment, the monthly payment on a 30-year loan at 4.1 percent would be $2,265.
Meanwhile, the median home price in Omaha, Nebraska is $156,600. With a 20 percent down payment, Omaha residents pay just $605 on that 30-year loan.
Credit is also an essential factor. Borrowers with high credit scores get the best interest rates, and the interest rate is one of the key ingredients in the monthly mortgage payment calculation. The higher the rate, the higher the payment.
The best rates, similar to the rates quoted above, are typically available for borrowers with FICO scores above 760. Borrowers with bad credit—typically defined as a score below 620 or 650—may have a hard time qualifying for a standard home loan. Borrowers in the middle will pay slightly more.
For those with bad credit histories, and people who have lived without using credit, it’s still possible to borrow. However, you may have less choice, and you may have to work harder to get approved. Look for lenders who offer manual underwriting and will have somebody review your “alternative” financial history to evaluate creditworthiness.
More Than the Monthly Payment
If you’re trying to figure out how much to spend on a home, remember that there’s more to your home purchase than the loan payment.
Taxes and insurance are often added to your monthly payment automatically. Your lender collects funds from you, places the money in escrow, and pays required expenses on your behalf.
Homeowners association (HOA) dues might also be a significant monthly expense. Those costs cover a variety of services in your community or building, and skipping those payments can lead to liens on your property—and potentially even foreclosure.
Other costs of home ownership can be surprisingly high. You might not pay those expenses monthly, but it’s helpful for some people to budget for a monthly savings amount for those costs. You’ll need to maintain your property, replace appliances periodically, and more. Some people suggest a budget of one percent of your property value per year for maintenance, but it’s easy to go higher than that, especially on older properties. If you need to buy furniture or make upgrades before moving in, you’ll face additional up-front costs.
Lifetime interest costs cannot be ignored. You may focus on the monthly payment when you decide how much to spend on a house, but you’re always paying interest when you borrow money. On a large loan like a home loan, the extra amount you pay in interest can be staggering. Look at various options and make a basic amortization table for each one. That exercise may steer you toward a less expensive home, a larger down payment, or a shorter-term loan.