For homeowners in Washington state, lowering your mortgage insurance premium can lead to significant savings. Mortgage insurance is often a requirement if you make a down payment of less than 20% on your home, but there are several strategies to help you reduce those costs. Here are some effective ways to get a lower mortgage insurance premium in Washington.
1. Improve Your Credit Score
One of the most impactful factors affecting your mortgage insurance premium is your credit score. Lenders typically offer better rates to borrowers with higher credit scores. Aim to boost your credit by paying off debts, making payments on time, and reducing your credit utilization ratio. A score above 740 can lead to more favorable mortgage insurance rates.
2. Consider a Larger Down Payment
While it’s common to put down less than 20%, contributing a larger down payment can significantly reduce your mortgage insurance premium. If possible, aim for at least 20% down to eliminate the need for mortgage insurance altogether. If a larger down payment isn’t feasible, even increasing your down payment to 10% or 15% can help you secure a lower premium.
3. Shop Around for Lenders
Not all lenders offer the same mortgage insurance rates. It’s beneficial to shop around and compare quotes from multiple lenders in Washington. Some lenders may offer better deals or special programs that can help reduce your mortgage insurance premium. Be sure to read the fine print and understand all costs associated with the mortgage.
4. Opt for Lender-Paid Mortgage Insurance (LPMI)
Lender-Paid Mortgage Insurance (LPMI) is a unique option where the lender pays the mortgage insurance premium on your behalf in exchange for a slightly higher interest rate. If you plan to stay in your home for several years, this option could save you money in the long run, making it worth considering.
5. Look Into Government Programs
Washington has several government programs aimed at making homeownership more affordable. Programs like FHA loans may have lower mortgage insurance premiums, while USDA loans offer mortgage insurance at reduced rates for eligible rural home buyers. Research these programs to see if you qualify and can benefit from lower premiums.
6. Reassess Your Home’s Value
If your home’s value has fluctuated and decreased since you purchased it, you might be paying more in mortgage insurance than necessary. Request a home appraisal to see if you now have more than 20% equity in your home. If so, you can apply to cancel your mortgage insurance premium, saving you money each month.
7. Keep Your Debt-to-Income Ratio Low
Maintaining a low debt-to-income (DTI) ratio is essential for getting the best mortgage insurance rates. Lenders prefer borrowers with a DTI below 43%. Try to reduce existing debts and avoid taking on new debt to improve your DTI ratio and increase your chances of securing lower mortgage insurance premiums.
In conclusion, there are several strategies available for homeowners in Washington looking to lower their mortgage insurance premiums. By improving credit scores, considering larger down payments, exploring lender options, and leveraging government programs, homeowners can potentially save significant amounts on their monthly payments. Always consult with a financial advisor or lender to explore the best options tailored to your specific situation.
