As Financial Literacy Month concludes, it is the perfect time to shine a light on some of the unsung tools that can help homebuyers save money in the current economic environment. A 2024 survey by U.S. Mortgage Insurers found that only one-third of Americans are aware that it is possible to qualify for financing with only three percent down. By using private mortgage insurance (MI), Americans can own a home years or even decades sooner than they could with a 20% down payment.
And now, new data shows that private MI helped American homebuyers collectively save more than $258 billion dollars in cash due at the closing table between 2020 and 2024 alone. With America’s 250th birthday around the corner, that means more than $250 billion in down payment funds were saved by American homebuyers, putting a cornerstone of the American Dream within reach for hundreds of thousands of households per year.
According to a USMI report, on average, it could take 26 years for a household earning the national median income in 2024 to save for 20% down plus closing costs at the median national sales price. That is a quarter century of renting, saving, and not recognizing the generational wealth building potential of homeownership. However, that same household could become homeowners 65% faster by only putting down 5% with the help of private MI, making homeownership attainable for first-time homebuyers much sooner.
For nearly 70 years, the private MI industry has helped Americans to realize affordable homeownership without large down payments, allowing them to come to the closing table with tens of thousands of dollars less in cash and access homeownership years earlier than previously possible. Thanks to the Working Families Tax Cuts Act signed by President Trump last summer, private MI is also once again tax deductible for qualifying homeowners for the first time since tax year 2021. During the period in which private MI was tax deductible, from 2007 to 2021, qualifying American homeowners benefited from an average deduction of $1,454 a year or $64.7 billion total over the 15 years it was available. Starting with tax year 2026 – the taxes borrowers will file in spring 2027 – qualifying homeowners once again can take advantage of this benefit.
Beyond the potential tax savings, it is important to note that private MI is one of the few costs associated with homeownership that has declined in recent years. Based on publicly released data, private MI premiums have decreased by 25% since 2017, driven by the increased use of risk-based pricing and savings passed to borrowers from the 2017 Tax Cuts and Jobs Act. Private MI premiums trending down are in stark comparison to other prices associated with homeownership. For example, homeowners insurance premium rates and household utility rates have increased 34% and 41%, respectively, in recent years.
As an added benefit, private MI not only helps homebuyers qualify for mortgage financing, but, in most cases, the cost is temporary. Unlike MI premiums paid on vast majority of loans insured by government-backed agencies that cannot be canceled, private MI paid monthly by borrowers can be canceled once the buyer has established a certain amount of equity and automatically terminates when 22% of the original value of the home has been paid off. That leads to lower monthly mortgage payments in the long run, in addition to the immediate benefit that is provided through the tens of thousands of dollars in cash that isn’t necessary to bring to the closing table.
For nearly 70 years, private MI has helped first-time and working-class homebuyers access the American dream of homeownership. Prospective homebuyers can learn more about these benefits and how private MI can help them join the millions of Americans who have saved billions by visiting LowDownPaymentFacts.com.
