Mortgage Insurance Premium MIP

    mortgage insurance premium MIP MIP is paid by homeowners who take out loan baggage by the federal housing Administration FHA until the 2017 tax cut and job act mortgage insurance premiums were deductible in addition to allowable mortgage interest however the further consolidate appropriation Act of 2020 allows tax deduction for MIP and private mortgage insurance PMI for 2020 and retroactively for 2018 and 2019. FHA packet lenders use mortgage insurance premium MIP as a tool to protect themselves against higher risk borrowers since FHA loan come with a down payment as low as 3.5 percent with a credit score as low as 580 default is a key concern FHA mortgage require every borrower to have mortgage insurance conversely conventional loan only need private mortgage insurance PMI policies if the down payment amount is less than 20 percent of the properties purchase price each FHA loan requires both an upfront premium of 1.75 of the loan amount and an annual premium of 0.45 to 1.5 percent payment of upfront premiums is at the loan issuant determination of the exact yearly costs come from the term of the loan amount borrowed and loan to value ratio each month 

    the loans payment amount will reflect the annual premium divided by 12 months along with the principal payment other chart usually added to the monthly fee include its grow amount for property taxes and homeowners insurance coverage if you make a down payment of less than 20 percent of an conventional Fannie Mae or Freddie Mac mortgage you will likely have to pay PMI each month until you build up at least 20 percent equity in your home USDA Rural mortgage utilize an alternative form of loan warranties from PMI canceling qualified mortgage insurance using a conventional loan the buyer May cancel the PMI once they pay 20 of the loans value or after the loan is 11 years old however the FHA may not allow you to take this reduction it depends on the origination date of the loan for loans originated between December 31 2000 and July 3 2013 if you have paid at least 78 of the loan to value amount of you may ask the lender to cancel the MIP for loans originated after July 3 2013 if you made a down payment of less than 10 percent of the home's value at loan origination you must pay the MIP for the life of the loan the only way to remove the qualified mortgage insurance on an FHA loan is to refinance it into a non-fha product borrowers who qualify for a conventional loan even if they will pay private mortgage insurance should also look at FHA Loans to determine which is the better deal those with lower credit score May do better with an FHA mortgage particularly if they can make a 10 

    down payment also some lenders May provide a spirit loan to cover the down payment amount be sure to talk to your tax accountant financial advisor and your bank to see which loan makes the most sense for your situation tax implication of qualified mortgage insurance premium every year your lender is required to send for mortgage interest statement to both you and the Internal Revenue Service this form lists your mortgage payment over the past year and can evade your income tax the total amount of the MIP or PMI premiums will be in box 5 of the form to claim a deduction for either type of mortgage insurance you must itemize your deduction using schedule a under the interest page section the deduction for this premium expired on December 31 2017 thanks to the passage of the tax cut and job act of 2017. however the further consolidate appropriation Act of 2020 passes a congress extended the deduction through December 31 2020 that means that the deduction was available for the 2019 and 2020 tax years and retroactively for 2018 taxes special consideration not everyone can take advantage of the deduction for qualified mortgage insurance premium MIP thank you

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