Financing in California>Question Details

Schlacher, Home Buyer in Los Angeles, CA

Can the UFMI be charges as a discount point? And is there something like lender-paid FHA MMI?

Asked by Schlacher, Los Angeles, CA Tue Dec 8, 2009

Can the UFMI be charges as discount point?

Is there something like lender-paid FHA MMI, to make it tax-deductible? (I know that until 2010 MI is tax-deductible anyways, but if I wanted to make sure that it


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A lender could pay your up front mortgage insurance premium and therefore avoid financing it into your loan amount but keep in mind, if this is an FHA loan, the UPfront premium is 1.75% and the lender will have to boost your rate to cover this cost that they are paying for you. UFMI is not a discount point but I suppose a lender could charge you 1.75% as a discount and than pay the mortgage insurance premium out of their fee income. Your monthly mortgage insurance premium in your payment will continue as a tax deductible item. Check with your lender to see how they could price in your UFMI.
1 vote Thank Flag Link Tue Dec 8, 2009
There are two different mortgage insurance charges when securing FHA financing, as you know. The Up Front Mortgage Insurance (UFMI) is 1.75% of the loan amount. This 1.75% can be added to the loan, and thus financed. This eases the pain of that expense, and the interest is tax deductible.

The monthly mortgage insurance is 100% tax deductible, assuming your combined household income is $100,000 or less, annually. Your ability to deduct this is reduced if you make $101,000 and completely phases out after $109,000 in annual earning. And yes, right now, that will likely not be tax eductible after 2010. For FHA loans, there is no lender-paid monthly mortgage insurance. But if there were, you would likely be paying 6% interest for your loan vs. 5% interest.

However, the key here is to remember the benefits that FHA loans bring. One of the mail benefits is that you only have to put 3.5% down. Isn't paying mortgage insurance, whether it is tax deductible or not, worth the trade off of only needing to put 3.5% down? Think about it this way. If you paid $400,000 for a home, without FHA loans, you would need to put 20% down, or $80,000. With FHA, you put 3.5% down, or $14,000, and you would be paying about $177 a month in mortgage insurance. I would take that deal all day long to avoid having to give the lender another $66,000 to buy the house.

FHA loans are fantastic loans and although the mortgage insurance makes them seem expensive, they allow you hold on to your hard earned cash. Good luck with your purchase!
0 votes Thank Flag Link Tue Dec 8, 2009
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