everything you need to know about FHA mortgage insurance – psst, there are TWO!

January 5, 2012 — Leave a comment

Effective April 18, 2011

FHA Monthly Mortgage Insurance Premium (MIP)

Increased By 0.25 to 1.15 Point

UFMIP Remained at 1.00 Point

FHA Mortgagee Letter 11-10

Current Monthly Mortgage Insurance Premium (MIP)

An annual premium, shown below, paid monthly, will charged based on the initial Loan to Value and length of the mortgage according to the following schedule:

    30 Year Loans MIP Fee

  • Less than 95% Loan To Value 1.10%
  • LTV >=95% Loan to Value 1.15%

    15 Year Loans MIP Fee

  • < 95% LTV  0.25%
  • LTV >=95% 0.50%

FHA charges Two Mortgage Insurance fees on each loan;

  • Up Front Mortgage Insurance Premium (UFMIP)
  • Annual mortgage Insurance (MIP) paid monthly.

FHA Upfront Mortgage Insurance Premiums (UFMIP)

UFMIP Fee is paid once and is typically financed by adding it to the loan amount although it may also be paid in cash by the buyer or seller.

Below are the current premiums:

  • Purchase Money and Qualifying Refinances = 1.00 Percent of loan amount.
  • Streamline Refinances (all types) = 1.00 Percent of loan amount.

Monthly Mortgage Insurance Premium (MIP)

An annual premium, shown below, paid monthly, will also be charged based on the initial Loan to Value and length of the mortgage according to the following schedule:

    30 Year Loans MIP Fee

  • Less than 95% Loan To Value 0.85%
  • LTV >=95% Loan to Value 0.90%

    15 Year Loans MIP Fee

  • Less than 95% Loan to Value  None
  • LTV >=95% 0.25%

FHA UFMIP Fee may be canceled

  • The home must be owned for at least five years.
  • And,the loan amount must be 78% or less of the original purchase price.

FHA Upfront Mortgage Insurance (UFMIP) Fee is refundable.

A portion of UFMIP may be refunable under the following conditions:

  • Refinanced within three years.
  • The new loan must be a FHA refinance.

 

Year     1        2       3       4       5       6       7       8       9       10      11       12

1 80     78      76     74     72     70     68     66     64      62      60       58

2 56     54      52     50     48     46     44     42     40      38      36       34

3 32     30      28     26     24     22     20     18     16      14      12       10

Is UFMIP Tax Deductable?

Good news!  The President has extended the Mortgage Insurance Tax Deduction through 12/31/11!

Under code section 163(h)(3)(E), FHA mortgage insurance premiums are deductible. The premiums must be paid in conjunction with the purchase of your principle residence. It also must be paid on a FHA mortgage issued after December 31, 2006. The deduction applies for 2007 through 2010.

If your adjusted gross income exceeds $100,000 the deductible premium is reduced by 10% of each $1,000 of adjusted gross income above the $100,000 to $109,000. Mortgage Insurance is not tax deductible for borrowers with income in excess of $109,000.

If you financed FHA Up Front Mortgage Insurance Premium (UFMIP), you must determine the portion of the premium that pays for insurance for the tax year by dividing the total premium by the stated term (number of months) of your mortgage, or 84 months, whichever is less.

Multiply that amount by the number of months during the tax year that you had the FHA mortgage. Enter the amount allocated to the tax year in the worksheet for Schedule A, Line 13, to figure your deduction for the tax year.

If your mortgage is satisfied before the end of your tax year, you cannot deduct the amounts that are allocated to periods after the mortgage is satisfied.

If you paid cash for an up front premium for insurance provided by FHA, VA or Rural Housing, commonly known as a UFMIP, Funding Fee and guaranty fee respectively, no allocation is necessary, and you figure your deduction for the tax year based on the full amount of the payment. Enter the full amount in the worksheet for Schedule A, Line 13, to figure your deduction.

This information was compiled from competent sources but I am not a qualified tax expert so Please verify this tax information with a licensed tax professional.

Below Are Previous UFMIP guidelines

Previous Upfront Mortgage Insurance Premiums

FHA will charge revised UFMIP in an amount equal to the following percentages of the mortgage:

  • Purchase Money Mortgages = 2.25%
  • Full-Credit Qualifying Refinances = 2.25%
  • Streamline Refinances (all types) = 2.25%
  • HOPE for Homeowners (Delinquent Mortgagors) = 2.00%
  • FHA Reverse Mortgages (HECM) = 2.00%
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