Mapping the Best & Worst States to Get a Mortgage

Did you know that where you live could cost you money when you own a home? The state you live in has a major impact on the cost of property, which drives your monthly mortgage payments. At the same time, the shock left from The Great Recession has changed the way people buy their homes. Take a look at the graphic below that shows you what the average monthly payment, and interest paid over the lifetime of a loan. Where do you rank?

  • The demand and population density of your area determines the average price of a home, which drives the monthly payments and total interest paid.
  • As rates increase over time, the amount of interest you pay on a loan will increase as well as your monthly payments for new loans
  • High cost of living areas, and dense population areas tend to drive up home prices
  • Homes in the mid-west tend to cost less to purchase
  • States that were hit hardest by the housing recession still have relatively high prices for homes

Americans have long considered home ownership to be part of the “American Dream”. Home affordability reached record lows after the recession brought on by a glut of inventory and low interest rates. Although supply shrank in recent years, the interest rates still sit near the 2016 lows. Where you live and when you buy determines the average cost of your home and the interest you pay.

Our methodology looks at current market interest rates from the Federal Reserve, the average price smoothed out over time from Zillow of median home prices, and a 30-year fixed loan with 20% down payment. The data excludes any applicable federal and state taxes, or home insurance. If you want to add in home home insurance costs you can check out our guide here that explains the typical cost.

States With The Highest Mortgage Payments and Lifetime Interest

1. Hawaii: $334,040 Lifetime Interest & $2,293 Average Monthly Mortgage Payment
2. District of Columbia: $306,426 Lifetime Interest & $2,104 Average Monthly Mortgage Payment
3. California: $297,619 Lifetime Interest & $2,043 Average Monthly Mortgage Payment
4. Massachusetts: $221,625 Lifetime Interest & $1,522 Average Monthly Mortgage Payment
5. Washington: $211,133 Lifetime Interest & $1,450 Average Monthly Mortgage Payment

States With The Lowest Mortgage Payments and Lifetime Interest

1. West Virginia: $52,783 Lifetime Interest & $362 Average Monthly Mortgage Payment
2. Oklahoma: $67,460 Lifetime Interest & $463 Average Monthly Mortgage Payment
3. Arkansas: $69,037 Lifetime Interest & $474 Average Monthly Mortgage Payment
4. Mississippi: $69,363 Lifetime Interest & $476 Average Monthly Mortgage Payment
5. Alabama: $71,809 Lifetime Interest & $493 Average Monthly Mortgage Payment

States with high demand and dense populations tend to drive up home prices. Coastal states like New York, California, and Massachusetts have packed populations, while plain states like Oklahoma and Arkansas have more sparse populations.

Lower interest rates impact higher cost areas more than lower cost areas. A drop in interest rates, such as the Federal Reserve hopes to achieve with their recent rate cut, will bring down the $2,293 monthly payment in Hawaii more than the $362 monthly payment in West Virginia. Places like Florida have high rates due to heavy population growth and clustering in major cities.

What’s interesting to see are exceptions to the norm such as Illinois (home of Chicago), Pennsylvania, and South Carolina with low monthly payments. At the other end Colorado, Utah and Nevada all have pretty high monthly payments. This shows that other factors influence home demand beyond simple geography.

While you can’t always control the state you live in, you can control how you get your mortgage. Choosing the right mortgage and lender can save large amounts of money both upfront and over the lifetime of the loan.

People looking to purchase a home should understand all the options available, as well as the costs you expect. We have a great guide on home loans that can help you understand your options and the costs.

With rates as low as they are it’s worth looking at whether refinancing your home can save you money. Especially in high cost states, saving on your interest rates now can put more money in your pocket over time. Check out our guide to home refinancing costs.

Do you think this graphic accurately represents what you see in the real world? Share your thoughts and comments below.

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