Open the PDF version here: MillennialeGuide
Open the PDF version here: MillennialeGuide
Open the PDF version here: MillennialeGuide
Do You Qualify for the Deduction?
Just because you have PMI premiums doesn’t mean you can deduct them. Here’s what qualifies you:
How to File for the PMI Deduction
You’ll have to itemize and use Schedule A.
If you make no more than $100,000 a year, put the amount of insurance premiums you paid last year on Line 13. Don’t include pre-paid premiums for this year. You’re doing taxes based on last year’s income and expenses, so this year’s premiums don’t count even if you pre-paid them last year. (More about deducting prepaid and upfront mortgage insurance here.)
If your adjusted gross income is between $100,000 and $109,000, use the worksheet included with Schedule A to figure out how much you get to deduct.
How Much Can You Save?
It depends on how much you’re paying. A good rule of thumb industry experts use: You’ll pay $50 a month in premiums for every $100,000 of financing. Keep in mind, though, that the amount of the down payment, type of loan, and lender requirements can all affect your actual cost.
For example, if you put 5% down on a $200,000 house, you’ll pay monthly PMI premiums of about $125. Increase your down payment to 10%, and you’ll pay less than $80 a month.
So how does this affect your tax bill? Let’s say your adjusted gross income is $100,000. You bought a $200,000 house in 2012, put down 5%, and paid $1,500 in PMI premiums ($125 times 12 months). The deduction for PMI cuts your taxable income by $1,500. If you’re in the 15% tax bracket, you save $225 on your tax bill ($1,500 x 15%), and if you are in the 25% tax bracket, you save $375 ($1,500 x 25%).
The Best Savings of All: Canceling Your PMI
Although the tax deduction is nice — at least while it lasts — getting rid of PMI altogether is even nicer.
You can cancel your PMI when you have 20% equity in your home. Lenders are required to automatically cancel it once you have 22% equity. If you think you’re at that threshold, find out more about canceling your PMI.
Get more tax tips with our complete Homeowner’s Guide to Taxes.
This article provides general information about tax laws and consequences, but shouldn’t be relied on as tax or legal advice applicable to particular transactions or circumstances. Consult a tax pro for such advice; tax laws may vary by jurisdiction.
By: Richard Koreto, Published: February 14, 2013
By Christina Mlynski
President Barack Obama’s budget for fiscal year 2014 looks at taking critical steps to grow the economy, specifically increasing measures to strengthen the housing market by ensuring every homeowner has an opportunity to refinance at today’s rates.
Feeding of the positive momentum in housing, Obama wants to provide $47.6 billion for Department of Housing and Urban Development housing programs, an increase of $4.2 billion, or 9.7%, from 2013, according to the proposed budget.
More than 90% of the funding increase will be used to maintain current levels of rental and homelessness assistance for families.
“Thanks to the hard work and determination of the American people, we have made significant progress over the last 4 years,” said President Barack Obama.
He added, “Our housing market is healing, our stock market is rebounding, and consumers, patients and homeowners enjoy stronger protections than ever before.”
Additionally, the budget also makes investments to revitalize distressed neighborhoods, reduces blight in communities hardest hit by the foreclosure crisis and supports sustainable economic development.
However, the White House must push for cuts and chose a few housing initiatives to take a hit, including the Home Investment Partnerships Program, which is allocated $950 million for 2014, down 5% from the 2012 enacted level.
The second limits funding for new housing construction, cutting $14 million from the 2012 enacted level. The remaining $526 million will support all 150,000 existing units in these programs.
In regards to rental housing assistance, the budget will provide $37.4 billion to 4.7 million low-income families, up from $34.8 billion allocated in the 2013 budget. Additionally, $2.4 billion is provided to end homelessness, up from $2.3 billion in the 2013 budget.
Meanwhile, $400 million is provided through the budget to transform neighborhoods with distressed HUD-assisted housing, up from $150 million in the 2013 budget.
The budget also will expand the Moving to Work Program to test locally driven rental assistance policies to achieve positive outcomes for families, streamline program administration and reduce federal costs.
President Obama proposed two programs to extend the success of the Neighborhood Stabilization Program while creating construction jobs to rehabilitate properties.
As a result, the budget will issue $3 billion for the Community Development Block Grant program and neighborhood stabilization activities. This funding level includes $200 million in new competitive funds to continue mitigating the foreclosure crisis.
The budget also includes $20 billion for the Housing Choice Voucher program to assist more than 2.2 million families with housing.
The Obama Administration projects that the Federal Housing Administration will insure $178 billion in loans in 2014, supporting new home purchases and refinanced mortgages that would significantly reduce borrower payments.
Additionally, the recent increase in FHA premiums will boost the agency’s capital reserves and increase Federal revenues.
FHA will unveil its proposed budget for 2014 Wednesday, which is likely to express the agency’s stance on the probability of making a first time draw from the Treasury, given the mutual mortgage insurance fund is at negative $13.5 billion.
I wanted to share this with you because I am doing what I can to extend loan limits and give people an opportunity to purchase a home that suites their needs.
August 16, 2011
800 San Benito St Ste C
Hollister, California 95023-4868
Thank you for contacting me about extending higher loan limits for borrowers who use Fannie Mae, Freddie Mac and Federal Housing Administration (FHA) loans. Fannie Mae and Freddie Mac, also commonly referred to as Government Sponsored Enterprises (GSEs), and the FHA provide affordable mortgage loans for homebuyers. I can assure you that I support making the current loan limit of $729,750 permanent and I remain committed to supporting policies that will help put our economy and housing market back on solid financial footing.
In high cost areas like our Central Coast, GSE and FHA loans are an important option for many of our neighbors. Along the Central Coast and across the nation, Americans are still dealing with the consequences of the housing meltdown that left close to one in four families with a mortgage underwater at the end of 2010. I strongly believe that Congress must support our families and create policies that get our nation’s economy back on track.
In 2008, in the midst of the economic recession, Congress and President Obama worked together to pass the Economic Stimulus Act of 2008 (H.R. 5140). Included in this legislation, which I voted for, was a provision that temporarily increased the mortgage loan limits for the GSE’s and FHA to $729,750. The loan limit was increased to make homeownership a reality for many Americans who would not normally be able to afford a mortgage in high cost areas like the Central Coast. GSE and FHA loans generally carry lower interest rates and lower down-payments than loans from traditional banks, which make them appealing for many homebuyers. These temporary limits are set to expire on October 1, 2011 and if they do expire, it will make it more difficult for homebuyers to afford real estate in high cost areas like California.
Solving the current housing crisis is a key component to our economic recovery. Therefore, you will be pleased to know that I am a cosponsor of HR1754, the Preserving Equal Access to Mortgage Finance Programs Act that would permanently set the conforming loan limit for Fannie Mae, Freddie Mac and FHA at $729,750. I have also cosponsored HRes 25 expressing the sense of Congress that the current mortgage deduction not be restricted further. Another bill I cosponsored is H.R. 2508, the Conforming Loan Limits Extension Act to extend the current conforming loan limits for an additional two years. I have also signed two letters to the House Appropriations Committee requesting they include language extending the higher loan limits for an additional year in the FY12 bill that funds the Department of Housing and Urban Development.
A healthy housing market will help our economy recover. Please be assured of my continued support for extending the higher loan limits.
Member of Congress
Take a peak at the interest rates below from my preferred lender Connie Boyd with Western Bancorp, who can close FHA deals within 21 days with their Delegated Underwriting status. Once their Underwriters give their approval, a buyer does not have to wait any longer. Most other lenders have their in-house lender that need another approval from a FHA underwriter. Way to go WB and keep up the positive industry changes!
The Federal Housing Administration (FHA) is constantly changing guidelines and restrictions in attempt to stay with the real estate market changes. Sometimes it makes the lending process a little unpredictable at times, especially when each lender has the capability to make acceptions or rejections
to add the potential borrower to their portfolio. To set a minimum standard on the type of home they will loan, look at a few things before writing an offer and going through the transaction. An appraiser or inspection could red flag these issu
es and turn the transaction upside down.
Here are some things that could hault a transaction:
Do not panic if something does come up, as you can always try to negotiate or cancel (best to have inspections and appraisal reports turned in early in the transaction). FHA is trying to protect their investment and make sure you live in a safe environmental, after all you are loaning off of their money. It is hard to bite the bullet, but it is all worth it when you can call the house your home.