Comparing Mortgage Lenders: Shopping for the Best PMI Rates
Many homebuyers don’t realize that PMI rates vary between lenders. Shopping around can save you significant money over the life of your loan. Here’s how to compare lenders effectively.
Why PMI Rates Differ by Lender
Lenders work with different private mortgage insurance companies, each with their own rate schedules. Your rate also depends on your credit profile, loan type, LTV ratio, and the lender’s chosen insurer.
What to Request from Each Lender
When comparing lenders, ask for a Loan Estimate (required within 3 business days of application). Review Section B or C for the PMI provider and annual premium. Compare this across multiple lenders.
Key Metrics to Compare
- PMI rate: Annual percentage of loan balance
- PMI type: Borrower-paid vs lender-paid
- Cancellation policy: Some lenders are more flexible
- Monthly PMI payment: Bottom-line dollar amount
Online Lenders vs Traditional Banks
Online lenders often have more competitive PMI rates due to lower overhead. Credit unions may offer special PMI programs for members. Don’t limit your comparison to traditional banks only.
The True Cost Comparison
Compare total monthly costs: principal + interest + PMI + taxes + insurance. One lender might offer a lower rate with higher PMI while another offers a higher rate with lower PMI. Calculate total monthly costs for an apples-to-apples comparison.
Using a Mortgage Broker
A mortgage broker can shop multiple lenders on your behalf, including accessing wholesale rates not available directly to consumers. Their fee is typically paid by the lender at closing.
Conclusion
Don’t settle for the first lender’s PMI quote. Shopping 3–5 lenders and comparing total monthly costs can easily save $100–$200 per month or more.
