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First-Time Homebuyers Are Struggling to Make Mortgage Payments. Consumers Spending Nearly 38 Percent of Income on Mortgage Payments

By Lizzie Kane

First-time buyers are spending far more than recommended on mortgage payments after borrowing costs in the US surged.

Those consumers typically spent 37.8% of their income on mortgage payments in the third quarter, up from 36.8% in the prior period, the National Association of Realtors said Thursday in a statement. The group said the payments are considered unaffordable if the monthly bill, including principal and interest, is more than 25% of a family’s income. 

Residential homes in Hercules, California, US, on Wednesday, June 15, 2022. The number of home sellers lowering prices has reached the highest level since October 2019, the latest sign that the housing market is slowing from its once-frenzied pandemic pace. Photographer: David Paul Morris/Bloomberg***DRONE VIEW****

Potential buyers are facing an affordability crunch as mortgage rates have more than doubled this year, slowing home sales across the country. Now, the monthly mortgage bill on a typical existing single-family home with a 20% down payment totals $1,840, about $614 more than a year ago. 

In the third quarter, 46% of the 185 metro areas measured by the Realtors group posted double-digit home-price gains from a year earlier, down from 80% of those areas in the second quarter. 

“Much lower buying capacity has slowed home-price growth and the trend will continue until mortgage rates stop rising,” Lawrence Yun, NAR’s chief economist, said in the statement. 

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