Nearly 800,000 Americans used private mortgage insurance to purchase a home in 2023, and 64% of them were first-time buyers, according to a report from U.S. Mortgage Insurers (USMI).
This new USMI data on low down payment and first-time borrowers provides some silver lining insights within the current residential real estate market, the firm says.
“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,” says Seth Appleton, president of USMI, in a release. “Without private mortgage insurance, far too many buyers would remain on the sidelines instead of building intergenerational wealth and taking part in the American Dream of homeownership.”
First-time buyers’ share of the private mortgage insurance market increased 7% from 2020 through 2023, according to the report.
The average loan amount for a home purchase backed by private mortgage insurance in 2023 was $346,817.
The 3% down segment of the private mortgage insurance market also grew 7% from 2020 through 2023, reaching pre-pandemic levels (18.14%).
Saving for a 20% down payment could take the average potential homebuyer 27 years — three times longer than the time to save for a 5% down payment that’s often used with private mortgage insurance, according to USMI’s data.
The total value of mortgage originations supported by private mortgage insurance in 2023 was approximately $283 billion.
As of the end of 2023, the industry insured nearly $1.6 trillion of mortgages, including $1.4 trillion of mortgages backed by Fannie Mae and Freddie Mac, protecting the housing finance system and taxpayers from credit risk.
“Private mortgage insurance is helping to expand access to homeownership for prospective homebuyers,” Appleton says. “While buyers face many obstacles in purchasing a home, private mortgage insurance helps solve one of the biggest challenges – the need for a large cash down payment – by allowing buyers to put down as little as 3 percent.”
Photo: Dane Deaner