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Home buyers are often focused on mortgage rates, home prices, and credit requirements. But another factor that’s complicating homeownership is rising home insurance costs. As natural disasters grow more frequent and rebuilding costs climb, homeowners’ insurance has become a major factor in mortgage approvals. Lenders now scrutinize insurance costs more closely than ever, and for many buyers, these rising premiums are the tipping point between approval and denial.
This article explores how rising home insurance costs are impacting mortgage approvals, why it matters to buyers and lenders, and what you can do to manage this evolving landscape.
Home insurance premiums have skyrocketed across the US, with new policies increasing by 9.3% in the first half of 2025 alone. Since 2022, premiums have surged by 45%, while coverage values have grown less than 12%. In some regions, homeowners are now spending more than half of their monthly mortgage payment on insurance and taxes combined.
When lenders evaluate a mortgage application, they consider the total monthly housing expense, known as PITI (Principal, Interest, Taxes, and Insurance). Rising insurance premiums inflate this figure, which can push a borrower’s debt-to-income (DTI) ratio beyond acceptable limits.
Below is a chart illustrating how average annual home insurance premiums have climbed since 2010 — and how those rising costs have steadily reduced the amount buyers qualify for when seeking mortgage pre-approvals.
| Year | Avg. Annual Mortgage Insurance Premium | Borrower Pre-Approval Power (Based on 43% DTI) |
| 2010 | $900 | $450,000 |
| 2015 | $1,050 | $440,000 |
| 2018 | $1,250 | $425,000 |
| 2020 | $1,450 | $410,000 |
| 2022 | $1,800 | $390,000 |
| 2023 | $2,050 | $375,000 |
| 2024 | $2,250 | $365,000 |
| 2025 | $2,450 | $350,000 |
What the chart shows:
The impact of rising insurance costs varies widely across the country. States prone to natural disasters, such as California and Colorado, have seen the steepest increases.
These regional disparities make it harder for buyers in high-risk areas to secure affordable mortgages, even if their credit and income are strong.
Mortgage companies are adapting their underwriting practices to account for insurance volatility. Some are tightening approval criteria, while others are requiring additional documentation or higher reserves.
If you’re planning to buy a home in today’s market, understanding how insurance affects your mortgage approval is essential. Here are some proactive steps to take:
Before making an offer, request quotes from multiple insurers. This helps you estimate your monthly costs and avoid surprises during underwriting.
Don’t just focus on the mortgage payment — include taxes and insurance in your affordability calculations.
Homes with newer roofs, updated systems, and low-risk locations tend to have lower insurance premiums. Avoid properties with features that insurers consider high-risk.
In high-risk areas, traditional insurers may decline coverage. Excess & Surplus (E&S) carriers offer alternatives, though often at higher costs.
Over recent years, housing affordability has been very tight, driven by high prices and rates. Now, escalating home insurance adds another layer of pressure.
Rising premiums reduce purchasing power. Even a slight monthly increase in insurance costs can reduce a buyer’s approved loan amount by thousands of dollars, depending on their DTI and interest rate.
First-time and moderate-income buyers are hit hardest, as they typically have tighter budgets and less flexibility to absorb unexpected costs.
In high-risk regions, homes become harder to sell if insurance is unaffordable or unavailable, dampening local market activity and property values.
How do rising insurance costs affect mortgage approvals?
Higher premiums increase the total monthly housing expense, which can push a borrower’s debt-to-income ratio beyond lender limits, jeopardizing approval.
What is included in the monthly housing expense calculation?
Lenders calculate housing costs using PITI — Principal, Interest, Taxes, and Insurance — so higher insurance directly increases this figure.
Can high insurance premiums cause a mortgage denial?
Yes. If the total monthly housing cost exceeds what the borrower can afford under lender guidelines, the mortgage may be denied.
Are certain regions more affected by rising insurance costs?
Yes. States like California and Colorado face higher premiums due to wildfires, earthquakes, and severe weather risks.
Do lenders require proof of insurance before closing?
Yes. Lenders need confirmation of active homeowners’ insurance to protect the property, which serves as collateral for the loan.
Can I shop around for cheaper insurance to improve approval chances?
Yes. Comparing quotes from multiple insurers can help lower your monthly costs and improve your DTI ratio.
Do older homes have higher insurance costs?
Often, yes. Homes with outdated systems, older roofs, or located in high-risk zones typically cost more to insure.
Can rising insurance costs delay mortgage closings?
They can. If insurance quotes come in higher than expected or coverage is hard to secure, it may delay final approval and closing.
Can I use a higher deductible to lower my premium?
Yes, choosing a higher deductible can reduce your monthly premium, but it also means more out-of-pocket costs if you file a claim.
Can insurance costs affect escrow requirements?
Yes. Lenders may increase escrow contributions to cover higher premiums, which raises your monthly mortgage payment.
What can I do to prepare for insurance-related mortgage challenges?
Get quotes early, factor insurance into your budget, choose low-risk properties, and work with professionals who understand regional insurance trends.
Rising home insurance costs are no longer just a budgeting concern — they’re a critical factor in mortgage approvals across the US. As premiums climb, lenders are tightening standards, and buyers must be more strategic than ever. Whether you’re a first-time home buyer or a seasoned investor, understanding the insurance landscape is key to securing financing and protecting your investment.
Are you ready to apply for a mortgage to buy a home in the Pacific Northwest? If so, we can help. Sammamish Mortgage is a mortgage company that has been providing mortgage programs to borrowers throughout Washington, Oregon, Idaho, Colorado, and California since 1992. Contact us today with any questions you have about mortgages, or visit our website to get an instant rate quote.
Whether you’re buying a home or ready to refinance, our professionals can help.
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