For Buyers With Modest Savings, Private Mortgage Insurance Could Be the Key to Unlocking Homeownership

In today’s high-cost housing market, where rising prices and interest rates have pushed homeownership further out of reach for many Americans, private mortgage insurance (PMI) is quietly helping hundreds of thousands of families cross the threshold into a home of their own.

According to the latest “50 States of Low Down Payment Homebuying” report from U.S. Mortgage Insurers (USMI), more than 800,000 borrowers used low down payment mortgages backed by private MI in 2024. This financial tool enabled buyers many with limited savings to secure financing without waiting decades to amass a 20% down payment

📈 Rising Costs, Stubborn Barriers

Bankrate data shows the median home price has jumped 20% in just five years, adding roughly $70,000 to the cost of a typical property. As a result, the average household now needs nearly $117,000 in annual income to comfortably afford a home.

Without help, saving for a 20% down payment at these price points could take decades. In fact, USMI’s state-by-state analysis reveals it could take the average homebuyer 27 years to save enough nearly three times as long as it would take to save for a 5% down payment often paired with PMI.

🏡 How PMI Opens Doors

Private mortgage insurance protects lenders in case a borrower defaults, but for homebuyers, it serves a very different purpose: it allows them to purchase a home much sooner and with less cash upfront.

“For nearly seven decades, private MI has created pathways to homeownership for qualified buyers especially first-time buyers while also safeguarding the housing finance system,” said Seth Appleton, President of USMI. “It’s a win-win that helps families build wealth while reducing risk in the broader market.”

2024 at a Glance:

• 65% of PMI-backed buyers were first-time homeowners.
• 35% had annual incomes below $75,000.
• Average loan size: $362,632.
• The industry insured $1.6 trillion in mortgages, including $1.4 trillion tied to government-sponsored enterprises (GSEs).
• Since 2008, PMI providers have covered $60 billion in losses, protecting taxpayers from mortgage defaults.
• Over its 68-year history, the industry has helped nearly 40 million people purchase homes with low down payments.

Where Saving Takes the Longest (and the Shortest)

For some would-be buyers, the road to a 20% down payment is especially steep:

• Washington, D.C. – 51 years
• Hawaii – 50 years
• California – 49 years
• Washington State – 37 years
• Montana – 35 years

By contrast, buyers in Iowa could reach their goal in just 15 years, highlighting the wide affordability gap across states.

These estimates account for median home prices (via 2024 Redfin data), 2023 median household incomes from the U.S. Census Bureau, and Federal Reserve data on personal saving rates.

Homeownership as a Wealth-Building Tool

USMI’s 2024 survey found a 6% increase since 2021 in the number of Americans who view homeownership as essential to achieving stability, financial security, and passing wealth to future generations.

The wealth gap between renters and homeowners remains stark:

• Median net worth of renters – $10,400
• Median net worth of homeowners – nearly $400,000

PMI, advocates say, can be the bridge that turns renters into owners years earlier allowing them to start building that equity much sooner.

The Bottom Line

While it’s not without cost PMI premiums add to monthly mortgage payments this tool can dramatically shorten the timeline to homeownership for those without six figures in savings. For many, that’s the difference between watching home prices climb from the sidelines and actually building a future in a place they own.

As affordability challenges persist, PMI’s role may grow even more important, giving financially responsible buyers with limited cash a fighting chance in a competitive market. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.