FHA Home Mortgage Loans in San Diego - UFMIP

FHA Home Mortgage Loan in San Diego - UFMIP

FHA Mortgage Insurance Premiums (MIP)
FHA (Federal Housing Administration) charges Mortgage Insurance Premiums (MIP) to protect the lender in the event of default.  They are collected by the lender and then forwarded to FHA.

There are two types of MIP. charged on FHA loans.  Up Front Mortgage Insurance Premium (UFMIP) and Monthly Mortgage Insurance Premium MIP. 

UFMIP is currently a fixed amount and was expected to become a variable amount based on the borrowers credit and loan to value in late 2009.  Actually, Risk Based UFMIP was intiated in July 2008 then placed on a one year moritorium until September 30, 2009.  September 30 came and went and FHA is still on fixed MIP and apparently is not going to reacitvate Risked Based UFMIP.

Currently, UFMIP is a one-time charge, at closing, of 1% of the loan amount and is normally added to the base loan amount and financed by the borrower.  The base loanis 96.50% of the purchase price so the resulting total loan to value (loan plus UFMIP) could be 98.20% of the purchase price.

Monthly MIP is paid monthly by the borrower to the lender.  The MIP payment is currently computed at 1.15% of the loan amount divided by 12.  MIP can be removed when the loan has seasoned for five years and the loan to value is 78% or less, based on the original appraisal.

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 2011.

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.

The Maximum FHA purchase Loan To Value (LTV) is 96.50% of the purchase price.

The Maximum FHA Refinance Loan to Value is 97.75 of the property value.

FHA Maximum Loan Amounts can vary in each county; currently the FHA maximum for San Diego County homes is $697,500 which covers the majority of San Diego homes.  In Los Angeles and Orange counties, the maximum FHA loan is $729,750.

FHA Credit Scores

FHA Does not have a Credit Score policy but lenders impose their own guidelines.  At the time this is written (August 2009) many lenders have recently increased their minimum FICO score to 640.  There are still a few that allow home buyers to have a 620 credit score and I have only one San Diego investor who will accept credit scores down to 580 on a case-by-case basis.

August 2009 - FHA Home Mortage Loan in San Diego - UFMIP