21 Years to Save for a Down Payment, Survey Finds

U.S. Mortgage Insurers, an association representing private mortgage insurance companies, said its annual state-by-state report on low down payment mortgage lending found saving for a 20 percent down payment could take potential homebuyers 21 years — three times the length of time it could take to save a 5 percent down payment.

The report said low down payment loans backed by private MI increased by 22.9 percent in 2019; top five states for low down payment home financing with private MI were Texas, California, Florida, Illinois and Ohio.

The report examines the number of borrowers helped, 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 20 percent versus a 5 percent down payment for each state plus the District of Columbia.

Key findings from the report:

–It could take 21 years on average for a household earning the national median income of $63,179 to save for a 20 percent down payment (plus closing costs), for a $274,600 single-family home, the national median sales price.

–The wait time decreases to seven years with a 5 percent down payment insured mortgage — a nearly 67 percent shorter wait time at the national level.

–In 2019, the number of homeowners who qualified for a mortgage because of private MI reached more than 1.3 million. Nearly 60 percent of purchase mortgages went to first-time homebuyers, and more than 40 percent had annual incomes below $75,000. The average loan amount purchased or refinanced with MI was $269,072.

–Over the past five years, the role of private MI in the low down payment sector increased from 34.8 percent of the insured market in 2015 to 44.7 percent in 2019.

“Last year, over 1.3 million homeowners purchased a home or refinanced an existing mortgage with less than a 20 percent down payment using private mortgage insurance,” said Lindsey Johnson, president of USMI. “Given the current economic environment and the desire of many people to keep more cash on-hand, low down payment loans are more important than ever. Loans backed by private MI are a great option as a time-tested means for accessing homeownership sooner while still providing credit risk protection and stability to the U.S. housing system.”