As the mortgage and housing markets continue to face challenges, nearly 800,000 low-down-payment homebuyers will take advantage of leveraged private mortgage insurance (PMI) in 2023, with first-time homebuyers accounting for 64% of the total. That’s according to a new report released american mortgage insurance company (U.S. Office of Naval Intelligence).
“Private mortgage insurance continues to help buyers qualify for financing and become homeowners with as little as 3% down, and remains one of the most important tools available to first-time and low- to moderate-income buyers throughout all market cycles.” USMI President Seth Appleton said in a statement.
“Without private mortgage insurance, too many buyers will remain on the sidelines, rather than building generational wealth and working toward the American dream of homeownership,” he added.
According to USMI, the states with the most 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 transactions).
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 PMI loan amount to purchase a home was $346,817.
“It is critical for housing finance stakeholders to dispel the long-standing myth that buying a home requires a large down payment and ensure the public understands the availability of low down payment mortgage options that have provided benefits to millions of borrowers including Many first-time borrowers) available. [low-to-moderate income] Homebuyers,” the report states.
Saving for a 20% down payment could take an average of about 27 years, the report said, three times as long as saving for a 5% down payment “commonly used for private mortgage insurance.”
Last year, private mortgage insurance supported $283 billion in mortgage originations. In terms of outstanding debt, the industry insures approximately $1.6 trillion in mortgage loans. The vast majority of this amount ($1.4 trillion) is tied to loans backed by government-sponsored enterprises Fannie Mae and Freddie Mac.
