Analysis: It Takes Median Household 20 Years to Save 20% Down for Median Home

Analysis: It Takes Median Household 20 Years to Save 20% Down for Median Home

It would take 20 years for a household earning the national median income of $61,372 to save 20 percent (plus closing costs) for a $262,250 single-family home, the national median sales price. Those are the findings of U.S. Mortgage Insurers (USMI), a trade association for private mortgage insurance companies.

USMI notes that the wait time drops to seven years if the household purchases a home with 5 percent down, where the loan is backed by private mortgage insurance.

“No, you do not need a 20 percent down payment to gain mortgage approval,” said Lindsey Johnson, president of USMI. “Our report underscores the critical role private MI plays in helping millions of first-time and middle-income homebuyers bridge the down payment gap across the United States.”

According to USMI, in 2018 more than 1 million borrowers used mortgage insurance to purchase or refinance a mortgage; nearly 60 percent of which were first-time homebuyers, and more than 40 percent had annual incomes below $75,000. The average loan amount purchased or refinanced with MI was $244,715 and the average FICO score for these borrowers was 741, compared to a 733 score for all home loan borrowers. The  table below shows the top five states in which MI was used by borrowers to purchase or refinance homes in 2018.

State

Number of Borrowers 
Helped with Private MI

First-Time 
Homebuyers

Texas

89,738

57 percent

Florida

77,565

56 percent

California

71,996

69 percent

Illinois

48,200

65 percent

Ohio

43,761

59 percent

In addition to helping borrowers qualify for low down payment mortgages, mortgage insurance also reduces the federal government’s exposure to mortgage credit risk, the report says. Private mortgage insurance serves as credit protection against mortgage credit risk in the event of a default. Since the 2008 financial crisis mortgage insurance has paid over $50 billion in claims.

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After earning her bachelor’s degree in journalism at the University of Central Florida, Tracey set out in the real world at Florida Realtors in 1994 as a communication assistant, working her way up to editor in chief of Florida Realtor magazine. In 2004, she left the association to start her freelance writing and editing business. One of her first clients was REAL Trends, and she started working for the organization in 2005. In 2014, Tracey was promoted to editor in chief of publications for REAL Trends. She handles the writing and editing of all REAL Trends publications and marketing materials, including LORE Magazine, the REAL Trends newsletter and the blog. She is also the primary podcast interviewer where she conducts interviews with top real estate industry leaders and affiliated industry leaders. Tracey is married with two children.

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