As a Texas native, I know that many Texans share the same dream: a house to call their own, a home to raise a family, and a place to create memories. As President of U.S. Mortgage Insurers (USMI), the association representing five of the six top private mortgage insurers in the United States, it has been rewarding to help that dream become a reality for so many people in the great state of Texas.
Unfortunately, many Texans – as well as millions of Americans nationwide – believe that homeownership is out of reach for them. While there are a number of reasons that many prospective homeowners perceive homeownership as out of reach, the most pervasive misconception is that they must have a 20 percent down payment.
The good news is that there exists a well-established home loan option in Texas that helps borrowers purchase homes without having to wait years to save for a 20 percent down payment.
For most borrowers unable to put down 20 percent, mortgage options include conventional loans with private mortgage insurance (MI) and government-backed loans like those insured by the Federal Housing Administration (FHA). While each option offers something different for every borrower’s specific financial background, a conventional loan with private MI is noteworthy as it has proven to be a time-tested method for Texas homebuyers to get an affordable mortgage.
For more than 60 years, private MI has helped nearly 30 million Americans – and hundreds of thousands of Texans – bridge the down payment gap to obtain the financing needed to purchase a home. With private MI, a qualified borrower can get a mortgage with as little as three percent down. In addition to the competitive pricing of these mortgages, private MI can be canceled when a borrower reaches 20 percent equity in their home. This added perk often makes private MI a more affordable option over other home loan programs such as mortgages backed by the FHA, which requires the vast majority of borrowers to pay mortgage insurance premiums for the entire life of the loan.
Texans have benefited greatly from private MI in the journey to homeownership. According to a recent report from USMI, it would take the average Texas homebuyer 18 years to save for a 20 percent down payment and closing costs. Fortunately, private MI helped nearly 80,000 Texans bridge that down payment gap in 2017, making Texas the number one state in the nation in terms of homeowners helped by MI.
In that group of new Texas homeowners, 55 percent of purchase loans went to first-time buyers, a group often described as the driving force of the housing market. They had an average FICO score of 737 and the average loan amount was $233,650. With the help of MI, they are now able to have the stability and build the kind of long-term wealth that comes with having equity in a home.
The report also highlights the number of minority homebuyers, including African-Americans, Hispanics, and Asian-Americans, who have successfully purchased a home in Texas. In 2016, 613,325 total loans were made in Texas, and of that total 200,279 – or 33 percent – were purchased or refinanced by minority borrowers.
We Texans are used to big things, and buying a home is one of the biggest purchases anyone will ever make. Therefore, it is important to learn about all home loan options available. Private MI has played a crucial role in making Texas homeownership as strong as it is and will continue to play a valuable role helping Texans get into homes in the future.
Lindsey Johnson, a native Texan, is the President of U.S. Mortgage Insurers (USMI)
