Blog: Reflecting on the American Dream of Homeownership This National Homeownership Month
June is National Homeownership Month and an opportunity to reflect on the importance of owning a home to American families. Homeownership is central to the American Dream and an aspiration – and inspiration – for millions of families. And it’s not exclusively about housing or shelter. In fact, respondents to USMI’s 2024 National Homeownership Market Survey noted that owning a home provides stability, is a good investment that provides financial security, and provides a sense of safety.
However, many think that homeownership has grown increasingly out of reach in recent years. USMI’s survey also found that 58% of Americans – and 65% of renters – say that it has become more difficult and challenging to purchase a home in recent years. Factors such as down payment affordability, lack of housing inventory, and stubborn mortgage interest rates that have lingered at their highest since the Great Financial Crisis all pose challenges for potential homebuyers.
Fortunately, as millions of homeowners now know, a down payment doesn’t need to be an obstacle that keeps a home out of reach. It is a myth that a 20% down payment is needed. Private mortgage insurance (MI) continues to make the dream of homeownership possible for millions of people across the country with down payments as low as just 3% of the home purchase price.
Recently, U.S. Mortgage Insurers (USMI) released its annual data for 2024, providing an in-depth look at the roughly 800,000 homebuyers who became homeowners with a low down payment mortgage backed by private MI.
Let’s bust the myth of a 20% down payment
USMI’s survey found that the ability to afford a down payment ranks as the top challenge to buying a home. In fact, at the national median household income of $80,610, it could take up to 26 years to save for a 20% down payment and closing costs on a $412,500 home, which is the national median sales price. However, private MI enables borrowers to qualify for mortgage financing with a down payment as low as 3%, putting homeownership within reach many years sooner. Since 1957, private MI has ensured low down payment borrowers have access to affordable and sustainable mortgage financing while protecting the government, taxpayers, and lenders against risk.
Private MI also allows borrowers to buy in challenging interest rate environments with the ability to refinance later if rates move lower. Beyond helping borrowers become homeowners sooner, allowing them to begin building equity and intergenerational wealth, private MI helps them stay in their homes. For homeowners that experience financial hardships, MI companies work with servicers to help borrowers avoid foreclosure through loan modifications and other loss mitigation alternatives.
Private MI is a temporary and relatively small cost
Unlike MI premiums for most Federal Housing Administration (FHA) and other government-backed loans, private MI is temporary and automatically terminates when the original loan-to-value (LTV) ratio reaches 78%, or can be cancelled upon request in certain circumstances. This reduces the homeowner’s monthly mortgage payment and leads to potential savings over the life of the loan. Additionally, as opposed to other expenses associated with homeownership, the cost of private MI is low, representing a small part of the total cost of homeownership according to Fannie Mae.
Data show that despite ongoing market challenges, private MI helped more than 800,000 borrowers in 2024 become homeowners, approximately 65% of whom were first-time homebuyers. Additionally, nearly 35% of those that purchased or refinanced a mortgage with private MI had annual incomes below $75,000, and the average loan amount with private MI was approximately $365,000, according to government-sponsored enterprise (GSE) data.
Private MI Protects Taxpayers and the Housing Finance System
In addition to supporting homeowners, private MI serves as the first layer of private capital protecting the housing system against default risk. The industry supported nearly $300 billion in mortgage originations in 2024 while protecting the GSEs, taxpayers, lenders and investors from risk of loss – ensuring that the private sector, not taxpayers, bears a greater share of the risks of any future housing downturns. In fact, private mortgage insurers have covered nearly $60 BILLION in claims since the GSEs entered conservatorship, saving the federal government and taxpayers from taking on this risk in the process.
After the Great Financial Crisis, the private MI industry took steps to strengthen its business model to better serve low down payment borrowers while providing greater confidence to market participants and policymakers. The strength and resiliency of private MI has been further reinforced by safeguards and requirements that have been enhanced over the years, including the Private Mortgage Insurer Eligibility Requirements (PMIERs), which set robust capital and operational requirements for insuring loans acquired by the GSEs. Further, the industry has significantly expanded its role as a “second pair of eyes” during mortgage underwriting and post-close processes to serve as a check on fraud and credit quality.
USMI strongly supports enabling homeownership for all mortgage-ready borrowers, including historically underserved households. We continue to welcome opportunities to work with others in the housing finance system, including the Federal Housing Finance Agency (FHFA) and the GSEs, to remove barriers to homeownership and increase access to affordable and sustainable mortgage credit.
One immediate step Congress can take to further support buyers and make homeownership more affordable without increasing risks to the housing finance system is to allow eligible homebuyers with low down payment mortgages the ability to deduct mortgage insurance premiums as if they were qualified mortgage interest. This deduction was claimed by 44.5 million low- and moderate-income homeowners between 2007 and 2021, with an average annual MI deduction amount of $1,454. USMI applauds the U.S. Senate Finance Committee’s reconciliation bill language which would renew and make permanent the MI premium deduction. The mortgage insurance premium tax deduction has historically enjoyed support from lawmakers in the House and Senate, and a broad coalition of industry groups, housing advocates, and civil rights organizations.
By working together, we can ensure that homeownership is an achievable financial goal for all Americans.
