Smaller loan sizes gave homebuyers a little breathing room last month, though borrowers across much of the country are still losing ground

Homebuyers applying for purchase mortgages saw their typical monthly payment ease to $2,162 in August from $2,175 in July, as smaller loan sizes absorbed the impact of higher mortgage rates, according to the Mortgage Bankers Association's (MBA) latest Purchase Applications Payment Index (PAPI).

The index measures new mortgage payments against borrower income. It slipped 0.6% to 154.3, and a lower reading means better affordability. That is a welcome reversal after conditions weakened in May as mortgage payments climbed.

The median payment is up $62, or 2.9%, from August 2025. Earnings grew 4.1% over the same period, which left the index 1.1% lower year over year.

"Homebuyer affordability improved slightly in August, as a decline in the median purchase loan amount helped offset the impact of higher mortgage rates," said Edward Seiler, MBA's associate vice president of housing economics and executive director of the Research Institute for Housing America (RIHA).

He added a caveat: "However, conditions remain challenging, with 27 states seeing affordability decline in August."

The relief was uneven across loan types. The median payment for Federal Housing Administration (FHA) applicants dropped $45 to $1,856, which is below the $1,863 recorded a year earlier.

Conventional applicants moved the other way. Their median payment edged up to $2,188, from $2,184 in July and $2,112 in August 2025.

Borrowers at the lower end of the market, the 25th percentile, saw payments fall to $1,492 from $1,512. New construction offered no such break. MBA's Builders' Purchase Application Payment Index showed the median payment on newly built homes rising to $2,214 from $2,210.

Idaho posted the weakest affordability, with a PAPI of 258.6, ahead of Nevada at 229.8 and Rhode Island at 213.7.