FHA Reduces Mortgage Insurance Premiums UPDATE

*Update 1/22/17: The Trump administration suspended the pending rate cut to FHA mortgage insurance indefinitely. The National Association of Realtors have requested that the premium cut be reinstated in order to help up to 40,000 new homebuyers in 2017. Presently, it is unclear whether this suspension will be repealed.*

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On Monday, the Federal Housing Administration announced it would be reducing monthly mortgage insurance premiums on loans closing or disbursing January 27th or later. This change means more borrowers may be eligible to purchase a home through the FHA in 2017.

The FHA provides government backed mortgages for as little as 3.5% down, which is why FHA loans are very attractive to first time and low-to-moderate income borrowers. In exchange for a lower down payment, homebuyers must pay mortgage insurance. When there is a reduction in this required cost it opens the door for more aspiring homebuyers.

Every time mortgage insurance premiums decrease, more borrowers can meet the debt-to-income ratio required to purchase a home. New borrowers who close on an FHA mortgage on or after January 27th could save an average of $500 this year, according to the U.S. Department of Housing and Urban Development. This comes at the right time for consumers who might be facing higher credit costs due to rising mortgage interest rates.

FHA mortgage products have always provided opportunities to creditworthy borrowers who may not be able to obtain conventional loans. This cut in mortgage premiums breathes new life into the housing industry and may enable more borrowers to utilize the FHA program to achieve the dream of homeownership.

To read the full HUD press release about FHA, please visit their site here.

First Home Mortgage is an approved FHA lender. To learn more about FHA loans, contact your local Loan Officer.

2016 Tax Deductions for Homeowners

Purchased or refinanced a home in 2016? Find out the tax benefits available to you as a homeowner.

For most people, the annual task of completing income taxes is about as exciting as a visit to the dentist’s office. BUT…homeownership typically means increased tax deductions, which are generally considered to be a good thing.

Use the information below as a reference to help you determine which items from last year’s closing may be written off on your 2016 income taxes.


Write Off Items for 2016 Taxes

The list below pertains to primary or vacation residences (for investment properties, please see IRS Publication 527). All the items listed below can be found on the Closing Disclosure signed at settlement. This may help you save money in 2017!

Points Paid on a Home Purchase in 2016 – Closing Disclosure Page 2, Section A

If any origination charges include points paid in exchange for a lower interest rate, they may be fully deductible. **Other fees in this section – application, underwriting, processing, etc.- may not be deductible.

Points Paid on a Mortgage Refinance in 2016 – Closing Disclosure Page 2, Section A

Points paid to your mortgage company in exchange for a lower interest rate may be deductible, BUT there is a distinction between could be deductible this year, and what is deductible over the life of the loan:

  • Points paid on the portion of the mortgage proceeds that were used for home improvements may be deducted this year.
  • Points paid on a rate term refinance or any portion of the mortgage not used for home improvements must be spread out over the life of the loan. **As outlined above, other fees itemized in this section may not be tax deductible.

Property Taxes (actual and pro-rated) – Closing Disclosure Page 2, Section F

Property taxes itemized in this section may be tax deductible in the year they are paid. However, property tax escrows in section G may NOT be tax deductible until they are actually paid by your mortgage company to the appropriate municipality, (city or county).

Pre-paid Interest – Closing Disclosure Page 2, Section F

Pre-paid interest is typically collected at closing to square the borrower(s) away through the end of the month. Because this is a pro –rated part of the payment to begin the amortization cycle in arrears, the interest noted in this section may also be deductible.

Upfront Mortgage Insurance & VA Funding Fee – Closing Disclosure Page 2, Section B

If your adjusted gross income is $109,000 or less, you may be able to deduct upfront mortgage insurance on FHA and conventional loans as well as the VA Funding Fee.

This list does not include all of the property taxes paid throughout the year or all of the mortgage interest that will be included in the 1098 form(s) that will be sent by your mortgage servicer(s).


**PLEASE NOTE: THIS OVERVIEW IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, TAX, OR FINANCIAL ADVICE. PLEASE CONSULT WITH A QUALIFIED TAX ADVISER FOR SPECIFIC ADVICE PERTAINING TO YOUR SITUATION. FOR MORE INFORMATION ON ANY OF THESE ITEMS, PLEASE REFERENCE IRS PUBLICATION 936.

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