mortgage insurance - The Mortgage Porter

Mortgage Insurance Tax Deduction extended through 2013

January 3, 2013 by Rhonda Porter 23 Comments

With the recent passage of the American Tax Payer Relief Act of 2012, Congress extended the ability to deduct mortgage insurance the same as qualified residence mortgage interest. This applies to homes with private mortgage insurance, FHA mortgage insurance (upfront and monthly) as well as VA and USDA funding fees.

A qualified home, as described by the IRS, is your primary residence or your second home. You cannot collect rent on your second home or it’s…. (are you ready for this?) an investment property and not eligible for this deduction.

This benefit is phased out for adjusted gross incomes over $100,000. Here is a chart compliments of MGIC regarding how much one may be able to deduct based on AGI:

The amount of mortgage insurance paid is disclosed on the Form 1098, along with the mortgage interest that was paid during that year.

For more information, please contact your personal CPA or tax professional. I am not a CPA, I am a Licensed Mortgage Originator for homes located in Washington state. If I can help you with your mortgage needs for your home located in anywhere in Washington, including Seattle, Sequim or Snoqualime, please contact me.

Filed Under: Mortgage Insurance Tagged With: congress, irs, mortgage insurance, taxes

FHA Mortgage Insurance Increasing in 2013

November 27, 2012 by Rhonda Porter Leave a Comment

Last week I shared with you part of HUD’s plan to no longer allow FHA mortgage insurance premiums to terminate to help improve their financial stability. This would be effective for loans guaranteed by HUD in 2013.

HUD also announced in their report to Congress, their plans to increase the MIP (mortgage insurance premiums) paid on FHA insured loans by an additional 0.10 basis points (or 0.1% of the loan amount). From HUD’s press release:

In 2013, enact an increase of 10 basis points or 0.1 percent to the annual insurance premium paid by borrowers on new FHA loans. This premium increase is expect to add $13 per month for the average borrower and will strengthen FHA’s capital position without limiting access to credit for qualified borrowers.

In the greater Seattle area (King, Pierce and Snohomish Counties), the FHA loan limit (as of today) for a 1-unit single family dwelling is $567,500. An increase of 0.1% for this loan amount would cost an FHA borrower an additional $47.29 per month.

If you are considering an FHA mortgage for your refinance, I highly recommend you do so as soon as possible while your mortgage insurance premiums may still be cancelled instead of for the life of the loan AND before the mortgage insurance premiums are increased.

If your home is located anywhere in Washington state, where I am licensed to originate mortgages, I can help you!

Filed Under: Mortgage Programs, Mortgage Insurance Tagged With: fha, hud, mip, mortgage insurance

FHA Mortgage Insurance to remain on loans FOREVER

November 20, 2012 by Rhonda Porter 11 Comments

HUD has announced in their Annual Report to Congress Regarding Financial Status of the FHA Mutual Mortgage Insurance Fund Fiscal Year 2012, their plan to revise the cancellation of FHA mortgage insurance premiums. This is set to go in effect on new FHA insured mortgages sometime in 2013.

From HUD’s report:

Under a policy change made in 2001, FHA has been cancelling required mortgage insurance premiums (MIPs) on loans for which the outstanding principal balance reaches less than 78% of the original principal balance. However, FHA remains responsible for insuring 100% of the unpaid principal balance of a loan for the entire life of the loan, such loan life often extending far beyond the cessation of the MIP payments. As written, the timing of MIP cancellation is directly tied to the contract mortgage rate, not the actual loan LTV. The current policy was put in place at a time when it was assumed that home price values would not decline, but today we know that LTV measured by appraised value in a declining market can mean that the actual LTVs are far lower than amortized mortgage LTV, resulting in higher losses for FHA on defaulted loans. Analyses conducted by FHA’s Office of Risk Management projects lost revenue by approximately $10 billion in the 2010-2012 vintages as a result of the current cancellation policy. The same analyses also suggest that 10%-12% of all claims losses will occur after MIP cancellation. Therefore, beginning with new loans endorsed after the policy change becomes effective later in FY 2013, FHA will once again collect premiums on FHA loans for the entire period during which they are insured, permitting FHA to retain significant revenue that is currently being forfeited prematurely.

With FHA running out of funds, they are having to take measures to protect this mortgage program. You can also expect to see mortgage insurance premiums (upfront and annual) to increase in addition to FHA mortgage premiums remaining on the life of the loan.

What does this impact you?

If you currently have an FHA mortgage, your mortgage insurance premium that you pay monthly is still set to drop off (cancel) once your principal balance reaches 78% of the loan to value and a minimum of 60 mortgage payments have been made.

However, if you currently have an FHA mortgage in the mid-to-high 4% range and you have been considering an FHA streamlined refinance, you need to act quickly.

If you are considering buying a home and you are planning on using FHA for financing, be prepared to have the FHA mortgage insurance remain on the loan until you either sell the home or can refinance to a conventional mortgage.

If you are interested in buying or refinancing a home anywhere in Washington state, I’m happy to help you!

Filed Under: Mortgage Programs, Mortgage Insurance Tagged With: fha, mortgage insurance

Preapproved with FHA Financing? You Better Double Check with your Lender.

March 8, 2012 by Rhonda Porter Leave a Comment

If you are currently preapproved to buy a home using FHA for your financing, I highly recommend you check with your mortgage originator to make sure your preapproval is still valid.

Why the worry? FHA will have higher mortgage insurance rates effective with new loans (case numbers issued as of) April 9, 2012. How much somebody is preapproved for is based on their debt to income ratios, which includes the proposed new mortgage payment.

Based on the scenarios I used on my post announcing these changes, a loan amount of $417,000 would see an increase in payment of $48.95. For a borrower who’s currently maxed out on their debt to income ratios (DTI), this could reduce their borrowing power by about $10,500. FHA “jumbo” borrowers are hit extra hard with FHA’s additonal tax fee, my previous post for a loan amount based on the Seattle FHA loan limit of $567,500 has an increase in payment of $183.85. For the borrower pushing their DTI, $183.85 increase in monthly payment pencils out to $39,700 in less home someone will qualify for.

Even if your preapproval letter states it’s valid until a certain date beyond April 9, 2012, it is subject to “changing market conditions”. Your scenario is not “locked in” or approved until you have a signed around contract that you’ve submitted to your lender to complete your loan application. Changing mortgage rates and property taxes also impact how much you qualify for.

Your mortgage originator can (and should) review your current preapproved scenario and plug in the mortgage insurance rates to determine how much your payment will be going up and to see if it impacts how much you’re preapproved for.

If you are considering buying or refinancing a home anywhere in Washington State, I’m happy to help you! Please click the links at the top of this page for a rate quote or to apply.

PS: This also impacts home owners who are considering refinancing from a non-FHA loan to an FHA or who are doing a credit qualifying (full doc) FHA streamlined refinance.

Filed Under: Residential Purchase, Home Buying, Mortgage Programs Tagged With: fha, mortgage insurance

HUD issues Mortgagee Letter Conforming Changes to Mortgage Insurance Premiums

March 6, 2012 by Rhonda Porter Leave a Comment

Hot off the press! HUD just released Mortgagee Letter 12-4 addressing all of the changes to FHA mortgage insurance premiums. *Unless your doing an FHA streamlined refinanced of a mortgage that was "endorsed" on or before May 31, 2009; your FHA mortgage insurance premiums are going up.

Upfront mortgage insurance premium increasing effective April 9, 2012. Currently the rate is 1% of the loan amount. Effective with case numbers issued April 9, 2012 and later, the premium will increase to 1.75%.

Increase to annual mortgage insurance premiums go into effect April 9, 2012. This increase is due to the Temporary Payroll Tax Continuation Act of 2011. NOTE: if you have a 15 year amortized FHA mortgage with a 78% loan to value, there is no annual mortgage insurance premiums.

FHA's annual mortgage insurance is paid monthly. The bps is multiplied by the FHA base loan amount to determine the premium and then divided by 12 months. A $100,000 loan with a loan to value over 95% would have an annual MIP of $1200. Divide this by 12 and the monthly premium is $100.

High Balance FHA annual mortgage insurance premiums will increase an additional 25 bps with case numbers assigned on or after June 11, 2012. In the greater Seattle area, this will impact FHA loan amounts of $417,001 to $567,500. If you have a higher FHA loan amount originated on or after June 11, 2012, add an additional 25 bps to the figures in the table above.

The above increases will impact all newly originated FHA mortgages for purchase and refinances, unless the home owner qualifies for the new reduced mortgage insurance rates with an FHA streamlined refi. The changes to mortgage insurance do not apply to FHA's reverse mortgages. Keep reading…

FHA Streamlined Refinances will have reduced FHA mortgage insurance premiums IF the FHA loan being refinanced was *endorsed on or before May 31, 2009 effective on case numbers issued on or after June 11, 2012. Upfront mortgage insurance premiums will be reduced from 1% to 0.01% of the base loan amount and the annual mortgage insurance will be reduced to 0.55% of the loan amount. Borrowers must be current on their existing FHA insured mortgage.

If your FHA loan being refinanced was endorsed June 1, 2009 or later, then the reduced rate does not apply. Your FHA mortgage insurance rates will be increasing based on the information above effective April 12, 2012.

NOTE: *Endorsed means when FHA actually insures the mortgage. This often happens months after closing!

If I can help you with your FHA refinance or purchase for your home located anywhere in Washington, please contact me.

FHA to reduce mortgage insurance premiums for some FHA streamlined refi's

Filed Under: Mortgage Programs Tagged With: fha, mortgage insurance