As home prices rise, home buyers are having to borrow more. The average amount for a mortgage on a home purchase recently surged to an all-time high of $395,200, the Mortgage Bankers Association reported for the week ending Jan. 22.
“Average purchase loan amounts in early 2021 continue to rise across all loan types, driven by a strong pace of home sales, tight housing inventory, and high home price-growth,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a statement this week in reporting the latest data on mortgage applications for the week ending Jan. 29. “Conventional, FHA, and VA purchase loan sizes all set new survey records last week.”
Record-low mortgage rates may be enticing more buyers to take on greater mortgage debt. Still, financial experts are warning home shoppers to beware of taking on too high of a mortgage and ensure they aren’t stretching their monthly payments beyond what is typically considered financially comfortable. Financial experts often say that families who pay more than 30% of their income for housing are considered “cost burdened,” which could put them in jeopardy of being able to cover other necessities like food, transportation, and medical care costs.
“Average Mortgage Amount Hits a Record High,” The Ascent/Motley Fool (Feb. 3, 2021) and “Mortgage Applications Increase in Latest MBA Weekly Survey,” Mortgage Bankers Association (Feb. 3, 2021)