Whenever a person purchases a home with less than 20% down there is usually a requirement to buy PMI or Private Mortgage Insurance. It requires a monthly payment until there is at least a 20% equity in the home. This payment is in addition to the mortgage payment. Prior to now, this PMI payment was not tax deductible, but thankfully beginning in 2007 with new home loans that require PMI, the payment will be tax deductible. This is with conventional or FHA loans.
There unfortunately are restrictions. Households must make less than $100,000 per year. This new program will benefit the low and middle class and be especially important to first-time homebuyers. The new tax deduction should make it possible for many renters to become homeowners.
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