ACCESSING THE AMERICAN DREAM
Low down payment mortgages help first-time buyers
BRANDPOINT
Traditionally, saving up for a 20 percent down payment has been the largest obstacle for aspiring homeowners and this challenge is even more acute when interest rates drive monthly mortgage payments higher. Despite higher rates cooling home sales last year, hundreds of thousands of first-time homebuyers leveraged private mortgage insurance (MI) to put as little as 3 percent down to access homeownership.
According to a report released by U.S. Mortgage Insurers (USMI), 64 percent of homebuyers who used private MI last year did so to purchase their first homes and to begin building equity, a 6 percent increase in first-time buyers’ share of the market from 2020. Considering a 20 percent down payment on the national median home price of approximately $425,000 is $85,000, many aspiring homeowners without the resources to make large cash down payments understandably choose private MI. After all, putting 5 percent down on that same home requires saving only $21,000 in comparison. USMI reports that 35 percent of homebuyers
using private MI in 2023 had annual incomes lower than $75,000.
“Private MI remains one of the most helpful tools available to first-time and low- to moderate-income buyers in the market. Private MI helps borrowers overcome the large down payment barrier to affordably and sustainably qual-
US 30-year fixed-rate mortgage falls to 6.20 percent
Lucia Mutikani REUTERS
WASHINGTON, D.C. — U.S. mortgage rates dropped this week on expectations that the Federal Reserve would start cutting interest rates next Wednesday, but will likely not offer an immediate boost to the housing market as home prices remain elevated.
The average rate on the popular 30-year fixed-rate mortgage fell to 6.20 percent, the lowest since February 2023, from 6.35 percent last week, mortgage finance agency Freddie Mac said in a statement on Thursday. It averaged 7.18 percent during the same period a year ago.
The average rate on the 15year fixed-rate mortgage declined to 5.27 percent from 5.47 percent last week. That compared to an average of 6.51 percent a year ago. The U.S. central bank is expected to kick off its easing cycle with a 25 basis points rate cut next week.
“But despite the improving mortgage rate environment, prospective buyers remain on the sidelines, as they negotiate a combination of high house prices and persistent supply shortages,” said Sam Khater, Freddie Mac’s chief economist.
ify for financing and start reaping the benefits of homeownership years earlier,” said USMI Board Chairman and Enact President and CEO Rohit Gupta. In 2023, private MI helped 800,000 buyers purchase homes using low down payment mortgages, and 39 million homebuyers have achieved this
cornerstone of the American dream with private MI since it was first introduced. If a 20 percent down payment were required, it would take the average homebuyer 27 years to save for the down payment and closing costs, three times longer than the time it would take to save for the 5 percent
down payment that is often used with private MI. Fortunately, you don’t need a 20 percent down payment to become a homeowner.
USMI President Seth Appleton described the role that private MI plays for housing affordability and access as “opening the homebuying experience
up to working families, including first-time buyers. People do not need to save for 20, 30 and even 40 years to meet the mythical - but not required - 20 percent down payment threshold to be able to afford their first house; instead, millions of homebuyers have achieved the American dream of homeownership and started building their wealth and equity by using private MI.”
Another advantage for homebuyers, according to USMI, is that private MI is a temporary cost; monthly borrower-paid MI can cancel after the homeowner establishes sufficient equity either through regular payments or home price appreciation. When mortgage insurance is canceled, the borrower’s monthly overall payment goes down.
There are many financing options for homebuyers to consider. Learn how you might be able to use private MI to start your homebuying process at lowdownpaymentfacts. com, a resource launched by USMI to offer homebuyers low down payment mortgage information and dispel the myth that a 20 percent down payment is required to become a homeowner.
COURTESY OF BRANDPOINT
Coming up with a down payment is often the biggest obstacle for aspiring homeowners.