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Over 48,100 in the state relied on private mortgage insurance to achieve homeownership, saving for a 20% down payment could take Illinoisans 21 years

WASHINGTON — U.S. Mortgage Insurers (USMI), the association representing the nation’s leading private mortgage insurance (MI) companies, today released its annual report on mortgage financing supported by private MI at the national and state levels. The report finds that the industry has helped more than 38 million low down payment borrowers over its 66-year history to secure mortgage financing, including over 1 million in 2022, according to data from the government sponsored enterprises (GSEs), Fannie Mae and Freddie Mac. Illinois ranked fourth in the nation for the sixth consecutive year for borrowers who benefitted the most from private MI. The report finds it could take Illinoisans 21 years on average to save for a 20% down payment plus closing costs, but 48,168 homeowners in the state avoided the wait by qualifying for a low down payment mortgage backed by private MI, with 67% of purchasers being first-time homebuyers.

“First-time homebuyers’ access to mortgage insurance became increasingly important in 2022 as many Illinoisans continued to contend with higher interest rates, elevated home prices, and constrained inventory,” said Seth Appleton, President of USMI. “The private MI industry is proud to support first-time, low- to moderate-income, and minority homebuyers in pursuit of achieving the American Dream.”

Private MI facilitates access to sustainable and affordable mortgage finance credit for millions of people who put less than 20% down on a home loan. With private MI, potential homebuyers can put down as little as 3%. According to research from Fannie Mae, private MI ranks among the lowest costs associated with homeownership, with total private MI payments representing 0.5% of lifetime homeownership costs for the average purchase borrower, plus borrow-paid MI can be canceled after a period of time.

The USMI report examines the number of borrowers served, the percentage of borrowers who were first-time homebuyers, average loan amounts, and average FICO credit scores. USMI also calculates the number of years to save a 5% versus 20% down payment for each state plus the District of Columbia. For many Illinoisans, the biggest hurdle in buying a home is the 20% down payment they mistakenly believe is required for mortgage approval.

Key findings about Illinois from the report include:

• It could take 21 years for an Illinois household earning the state median income of $79,253 to save 20% (plus closing costs) for a $263,400 single-family home, the median sales price in the state.
• The wait time decreases by 66% if the household purchases a home with a 5% down payment loan backed by private mortgage insurance.
• Of the Illinoisan homeowners who secured a low down payment loan with private MI in 2022, 67% (a 2% increase from 2021) of purchase mortgages went to first-time buyers, with an average loan amount of $265,655.

“For 66 years, the private MI industry has been benefiting first-time homebuyers, enabling millions of families to access affordable, low down payment mortgages, while also promoting systemic safety and soundness,” Appleton added. “Private MI allows Illinois homeowners to lock in their housing costs and build equity and long-term wealth sooner.”

Private MI provides protection against mortgage credit risk and is structured to stand in front of default-related losses that would otherwise be borne by the GSEs or taxpayers in the conventional mortgage market. As of the end of 2022, the industry insured over $1.5 trillion of mortgages, including $1.3 trillion of mortgages backed by the GSEs. Private MI has proven to be a reliable method for shielding the GSEs from losses, having paid nearly $60 billion in claims since the 2008 financial crisis and housing market downturn.

USMI worked closely with federal policymakers, industry groups, and consumer organizations to support and advocate for low down payment homebuyers and homeowners throughout 2022. The organization sent letters to the Senate Finance Committee and House Ways and Means Committee in support of bipartisan legislative initiatives to make permanent and expand eligibility of homeowners’ ability to deduct MI premiums from federal income taxes; submitted a comment letter to the Federal Housing Finance Agency’s (FHFA) proposed “Strategic Plan for Fiscal Years 2022-2026;” expressed support for efforts to remove barriers to homeownership, increase access and affordability, and promote sustainable homeownership for minority homebuyers; and supported FHFA’s ongoing review of the GSEs’ pricing frameworks, particularly the appropriateness of upfront fees on loans with private MI risk protection; among many other actions it took in support of first-time, minority, and low- to moderate-income homebuyers.

The complete report is available here and more specific information on Illinois is available here.

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U.S. Mortgage Insurers (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.