There are certain loan programs that allow you to absorb the mortgage insurance into the rate. By taking a slightly higher interest rate, you will not have to make monthly Mortgage Insurance payments. Some people prefer this method of MI as mortgage interest is tax deductible.
I would continue making those payments
The 31% you are referring to is the Debt to Income Ratio, which includes your monthly debts (Credit Cards, Car Payments, Installment Loans, etc), Mortgage Payment, Taxes, and Insurance.So regardless of whether you pay your escrow (taxes and insurance) separately, you will need to count that payment in your Debt to Income ratio.31% seems a bit low, though, for a lender.