As the mortgage and real estate markets continue to face challenges, nearly 800,000 low down payment home purchases in 2023 leveraged private mortgage insurance (PMI), with first-time homebuyers accounting for 64% of the total. This is according to a new report published by U.S. Mortgage Insurers (USMI).
“Private mortgage insurance continues to help buyers qualify for financing and become homeowners with down payments as low as 3%, and remains one of the most important tools available to first-time and low- and moderate-income buyers in all market cycles,” USMI President Seth Appleton said in a statement.
“Without private mortgage insurance, far too many buyers would remain on the sidelines instead of building intergenerational wealth and working towards the American Dream of homeownership,” he added.
According to USMI’s tabulations, the top states that make use of private mortgage insurance for home purchases are Texas (70,446 loans in 2023), Florida (54,190), California (42,920), Illinois (36,589) and Ohio (33,649).
The report also found that the share of first-time homebuyers in the PMI market increased by 7% between 2020 and 2023, while the average loan amount for a home purchased with PMI was $346,817.
“It is critical for housing finance stakeholders to dispel the persistent myth that a large down payment is required to purchase a home and ensure that the public is aware of the availability of low down payment mortgage options that have served millions of borrowers, including many first-time, minority, and [low-to-moderate income] homebuyers,” the report stated.
Saving for a 20% down payment could take an average of roughly 27 years, three times longer than it would take to save for a 5% down payment that “is often used with private mortgage insurance,” according to the report.
Last year, $283 billion in mortgage originations were supported by private mortgage insurance. In terms of outstanding debt, the industry insures approximately $1.6 trillion in mortgages. The vast majority of this total ($1.4 trillion) are tied to loans backed by government-sponsored enterprises Fannie Mae and Freddie Mac.
