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New Report Finds Private Mortgage Insurance is a Key Resource for Low Down Payment Buyers

WASHINGTON, DC — In the midst of ongoing housing market challenges, characterized by high interest rates, high home prices, and constrained inventory, a new report from U.S. Mortgage Insurers (USMI) shows that first-time and low down payment borrowers across the country continued to purchase homes with low down payment mortgages backed by private mortgage insurance. Nearly 800,000 Americans used private mortgage insurance to purchase a home in 2023, and 64% of them were first-time buyers. This new USMI data on low down payment and first-time borrowers provides some silver lining insights within the current residential real estate market.

“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,” said Seth Appleton, USMI president. “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.”

National Trends
The new USMI report found:

• Approximately 800,000 people in 2023 became homeowners using low down payment mortgages backed by private mortgage insurance.
• 64% of purchasers with private mortgage insurance in 2023 were first-time homebuyers. Nearly 35% had annual incomes below $75,000.
• First-time buyers’ share of the private mortgage insurance market increased 7% from 2020 through 2023.
• $346,817 was the average loan amount for a home purchase backed by private mortgage insurance in 2023.
• 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.
• 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.
• Nearly 39 million borrowers have benefited from private mortgage insurance since 1957.

“Private mortgage insurance is helping to expand access to homeownership for prospective homebuyers,” continued Appleton. “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%.”

State Trends
The new report found that from 2020 – 2023, first-time homebuyers’ share of the private mortgage insurance market increased in all 50 states. Forty-two states saw consistent year-over-year growth, with 35 states seeing sizable increases between 5% and 16%. Moreover, key trends observed in states include:

• Vermont, Delaware, Maine, South Dakota, and Missouri saw the biggest increase in first-time homebuyers’ share of the private mortgage insurance from 2020 – 2023.
• Missouri, Michigan, Indiana, Iowa, and Ohio saw the largest growth in the 3% down payment market using private mortgage insurance from 2020 – 2023.

Top Five States Where Borrowers Used Private Mortgage Insurance in 2023
Texas, Florida, California, Illinois, and Ohio ranked as the top five states for mortgage financing with private mortgage insurance in 2023. These states were also ranked in the top five for private mortgage insurance use in 2022.

40 states saw a consistent year-over-year increase in the 3% down payment segment’s share of the private mortgage insurance market from 2020 – 2023, with 13 states experiencing the biggest gains of at least 10% or more. Eighteen more states saw an increase of over 5% during that same period of time.

Why Use Private Mortgage Insurance?
Private mortgage insurance helps low down payment borrowers access affordable mortgage financing while protecting the government, taxpayers and lenders against risk. Private mortgage insurance enables a borrower to qualify for mortgage financing with a down payment as low as 3%.

Private mortgage insurance allows borrowers – who are not able to put down 20% – to qualify for a conventional loan by insuring the lender against potential losses in the event a borrower is not able to repay the loan and there is not sufficient equity in the home to cover the amount owed. Amassing a large down payment can be one of the biggest hurdles to homeownership, particularly for first-time buyers.

Private mortgage insurance has proven to be a reliable method for protecting Fannie Mae, Freddie Mac, lenders, investors, and taxpayers from losses, having paid $60 billion in claims since the 2008 financial crisis and housing market downturn.

The complete 2024 report is available here, along with fact sheets for all 50 states and the District of Columbia.

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USMI is dedicated to a housing finance system backed by private capital that enables access to housing finance for borrowers while protecting taxpayers. Mortgage insurance offers an effective way to make mortgage credit available to more people. USMI is ready to help build the future of homeownership. Learn more at www.usmi.org.