With the same mortgage terms, can the average household afford the average home price of $62,653 with no down payment?

• A. Yes
• B. Not enough information
• C. No
• D. Only with a large down payment

Answer: (C)

When evaluating affordability, the key is what the monthly housing cost would be relative to income and loan requirements. If you finance the full purchase price with no down payment, you’re borrowing the entire amount of the home price, plus you’ll face the costs that come with a high-balance loan: principal and interest, property taxes, homeowner’s insurance, and typically private mortgage insurance because there is no down payment.

Even though the loan amount is only about the stated price, those additional costs push the monthly payment higher. Lenders also apply debt-to-income rules, meaning the total monthly housing payment (PITI plus mortgage insurance if required) must stay within a portion of the borrower’s gross income. For the average household, the combined effect of a 100% financing scenario and the ongoing costs tends to exceed what is considered affordable under standard lending guidelines.

So, with the same mortgage terms and zero down payment, the average household is not expected to be able to afford the average home at that price. A large down payment would reduce the loan amount and often remove or reduce the need for mortgage insurance, making the payment more affordable, but that scenario isn’t what’s described here.