topic Re: FHA Rules to change around March 31st on Mortgage Insurance! in Mortgage Loans

FHA Rules to change around March 31st on Mortgage Insurance!

MovingForward_2012 — Fri, 18 Jan 2013 23:45:39 GMT

Someone else posted this article that talks about mortgage insurance tax breaks going back into effect for 2012 but as I was reading the article, I noticed something HUGE that is changing on FHA loans sometime after March 31st.

Homeowners will no longer be able to cancel the mortgage insurance on their FHA loan after they make 60 payments and the balance is 78% of the original appraised value! Once this change goes into effect, homeowners will have to pay mortgage insurance for the life of the loan!!!! My mortgage insurance will be $346 per month so I am looking forward to when I will no longer have to pay it. The good news is that homeowners who use an FHA loan to buy a house BEFORE the new rules go into effect, won't be impacted so their mortgage insurance can still be cancelled after 5 years.

If you are in the process of getting an FHA loan, try to close before the new rules go into effect, which will be shortly after March 31st as under the new rules, you will have to pay mortgage insurance for the life of the loan. A link to the article is below.

http://money.msn.com/taxes/article.aspx?post=a9c7cefc-6079-4b82-afe2-29dae7c14e7d

Re: FHA Rules to change around March 31st on Mortgage Insurance!

Mike_B03 — Sat, 19 Jan 2013 00:35:02 GMT

From the article, it sounds like no date has been set and an annoucment is set to be made on or before March 31st. There is no way they would implement it that quickly, probably will annouce it then and say it goes into effect the following January or something like that.

Also, people can always refinance into a conventional loan down the road, they don't have to stay with an FHA loan for the life of the loan.

Re: FHA Rules to change around March 31st on Mortgage Insurance!

MovingForward_2012 — Sat, 19 Jan 2013 00:42:57 GMT

Right but rates will be going up so refinancing won't be as attractive and may not save any money. If you read the article closely it said that the new rules will go into effect shortly after the announcement on or before March 31st. So it is best to get in now if you can.

Re: FHA Rules to change around March 31st on Mortgage Insurance!

ficogirl1 — Sat, 19 Jan 2013 01:09:23 GMT

I disagree. The article states:

"No date has been set for the change, HUD spokesman Lemar Wooley said by email. He expects an announcement by March 31 or sooner."

That means that the announcement regarding when the change will occur will be made by March 31 or sooner, but there is no date set for when the change will be implemented.

Re: FHA Rules to change around March 31st on Mortgage Insurance!

Mike_B03 — Sat, 19 Jan 2013 01:25:33 GMT

MovingForward_2012 wrote:
Right but rates will be going up so refinancing won't be as attractive and may not save any money. If you read the article closely it said that the new rules will go into effect shortly after the announcement on or before March 31st. So it is best to get in now if you can.

What happens to people who are in the process but can't close yet since it's a new build? I hope we can be grandfathered in if there is a change because it would be BS otherwise.

Re: FHA Rules to change around March 31st on Mortgage Insurance!

MovingForward_2012 — Sat, 19 Jan 2013 03:07:12 GMT

Mike_B03 wrote:
MovingForward_2012 wrote:
Right but rates will be going up so refinancing won't be as attractive and may not save any money. If you read the article closely it said that the new rules will go into effect shortly after the announcement on or before March 31st. So it is best to get in now if you can.
What happens to people who are in the process but can't close yet since it's a new build? I hope we can be grandfathered in if there is a change because it would be BS otherwise.

I think you will be grandfathered in as you sign the mortgage insurance disclosure form quite awhile before actual closing and I think that form will protect you.

You're right, no one knows when it will be implemented but I am assuming it will probably within a year from now. Don't know if it will be sooner or later. But I just wanted to give folks that are considering putting off buying a home for 1-2 years a heads up that if they will be doing an FHA loan, they might want to reconsider their timeframe given these changes. The bigger the house, the more mortgage insurance costs. And $346 per month for me is not trivial so I look forward to the savings in five years. If it is $50 a month for a smaller home, the change is not so big of an impact.

Re: FHA Rules to change around March 31st on Mortgage Insurance!

Mike_B03 — Sat, 19 Jan 2013 08:38:57 GMT

Any chance of refinacing into a conventional loan fairly soon after you get your house? Over 5 years, you'll end up paying $20,760 in PMI. It will depend a lot on what interest rates are later on, and how much closing costs are...but if house values go up and you have some additional money to put down, it would probably be good to go in that direction.

Re: FHA Rules to change around March 31st on Mortgage Insurance!

MovingForward_2012 — Sun, 20 Jan 2013 00:03:41 GMT

It's possible but not a guarantee of course. I remember trying to refinance out of a two year ARM on our first house 8 years ago, and it was like continuously finding a mirage of water in the desert. Totally understand those circumstances were different with a crumbling housing market. But I just don't consider refinance a part of my plan as I am going about the home purchase this go round.

Now I completely forgot that next year I will get $3600 back from the IRS at a minimum and that amounts to $300 per month off the mortgage so $346 in PMI will really be $46 in PMI after a year. So you could estimate the same for your interest and who knows, it might completely offset the PMI.

I am still looking forward to when the PMI is cancelled because I will get $646 off my mortgage each month vs $300 and that is when I will consider our family stabilized in our dream home and can start taking vacations.

Re: FHA Rules to change around March 31st on Mortgage Insurance!

Mike_B03 — Sun, 20 Jan 2013 00:37:28 GMT

How are you getting the $3600 back from the IRS? Is it related to the PMI?

Re: FHA Rules to change around March 31st on Mortgage Insurance!

JM-AM — Sun, 20 Jan 2013 06:48:17 GMT

Assuming she is referring to tax benefits...

But I would discuss any tax related issues with a professional CPA who is qualified.

Re: FHA Rules to change around March 31st on Mortgage Insurance!

beb86 — Sun, 20 Jan 2013 06:56:45 GMT

Mike_B03 wrote:
MovingForward_2012 wrote:
Right but rates will be going up so refinancing won't be as attractive and may not save any money. If you read the article closely it said that the new rules will go into effect shortly after the announcement on or before March 31st. So it is best to get in now if you can.
What happens to people who are in the process but can't close yet since it's a new build? I hope we can be grandfathered in if there is a change because it would be BS otherwise.

I would assume as long as you had a case number with FHA (under contract) by the deadline you should be fine. Thats how we got out of paying the upped FHA fees last year.

Re: FHA Rules to change around March 31st on Mortgage Insurance!

MovingForward_2012 — Sun, 20 Jan 2013 18:23:51 GMT

The $3600 back is what my broker estimated from writing off the interest and property taxes at tax time. We are buying a $347,900 home so the write off amount is quite substantial. The $3600 doesn't take into account the mortgage insurance that is now deductible again so I will get more than $3600. Our property taxes are $3100 a year...not a trivial amount there either. So I'm looking forward to April 15, 2014. LOL! This is the nice part about owning a home...itemized deductions!

Re: FHA Rules to change around March 31st on Mortgage Insurance!

MovingForward_2012 — Sun, 20 Jan 2013 18:29:14 GMT

Oh and the article does say that those who are already owning a home or in the process of owning with an FHA loan, they will be exempt from the new rules. At what point in the process, not sure but I assume if you sign the contract before the new rules are in place, you're exempt. I'm sure the govt will clarify more at a later date.

Re: FHA Rules to change around March 31st on Mortgage Insurance!

Mike_B03 — Sun, 20 Jan 2013 18:31:36 GMT

MovingForward_2012 wrote:
The $3600 back is what my broker estimated from writing off the interest and property taxes at tax time. We are buying a $347,900 home so the write off amount is quite substantial. The $3600 doesn't take into account the mortgage insurance that is now deductible again so I will get more than $3600. Our property taxes are $3100 a year...not a trivial amount there either. So I'm looking forward to April 15, 2014. LOL! This is the nice part about owning a home...itemized deductions!

Those aren't tax credits though, are they? Don't they just reduce the amount of money you are taxes on (tax deduction)? Also, you need to itieize deductions in order to claim it right? Maybe with a home it will be different but we've always taken the standard deduction.

Re: FHA Rules to change around March 31st on Mortgage Insurance!

MovingForward_2012 — Sun, 20 Jan 2013 18:45:03 GMT

You have to itemize and only when you own a home does the itemized deductions exceed the standard deduction unless you have a lot of investments.

Re: FHA Rules to change around March 31st on Mortgage Insurance!

MovingForward_2012 — Sun, 20 Jan 2013 18:46:17 GMT

I think the mortgage insurance is a tax credit but interest and prop taxes should be itemized.

Re: FHA Rules to change around March 31st on Mortgage Insurance!

jwpezd — Sun, 20 Jan 2013 21:48:38 GMT

When is this going in to effect I'm confused is it in match or not?

Re: FHA Rules to change around March 31st on Mortgage Insurance!

MovingForward_2012 — Sun, 20 Jan 2013 21:53:17 GMT

You can claim the mortgage insurance tax credit on your 2012 tax return. Itemizing interest and property taxes have been in effect for decades for homeowners.

Re: FHA Rules to change around March 31st on Mortgage Insurance!

ficogirl1 — Mon, 21 Jan 2013 05:19:10 GMT

Just to clarify, there is no mortgage insurance tax credit for the 2012 tax year. The mortgage insurance, just like mortgage interest and property taxes, can be deducted as an itemized dedcution for the 2012 tax year. The amount of the deduction that you may be entitled to will vary for each individual person and the exact amount will be determined when you file your income tax return.

The amount of a tax deduction determined by a realtor, and not a tax professional, should be taken with a grain of salt. In addition, you must be careful to not determine your affordability of a mortgage payment on a tax deduction, because there is a possiblilty that the deduction may not be available in the future.

Re: FHA Rules to change around March 31st on Mortgage Insurance!

MovingForward_2012 — Mon, 21 Jan 2013 10:50:39 GMT

I disagree with that. You are also going to pay the same amount of interest every year on a home if you have a 30 yr fixed. That amount of interest will always be an itemized deduction on your taxes. Your loan amount, interest rate, and loan term will vary your taxes paid. Own a bigger house, pay more interest on larger principal, and get more back each the master plan. Going after mortgage interest and tax deductions, was discussed during the election season as the govt was talking about on one side, that there aren't enough deductions that affect just the wealthy to see a significant amount of revenue. And so they knew to see a big of revenue, they would have to slash the mortgage interest deduction when instead tax rates on folks making $400,000 or more was implemented.

So no one is saying count on it but people have been getting substantial IRS refunds based on their itemized mortgage deductions for decades. And no one said go find a home you can't afford; you have to be able to afford it on day #1 but other leisurely items may be something to look forward to given the extra money back from the IRS each year.