Kentucky Private Mortgage Insurance or PMI


Private Mortgage Insurance or PMI for Kentucky Mortgage Loans

Help your buyers save thousands over Kentucky FHA Home buyers – and get homes moving faster!

Your clients come to you for professional advice, so first ask the question: Is their credit score 680 or higher and do they have 3% or more for a down payment1?

If the answer is yes: A funding option to consider is one of PMI’s rate plans that can save your clients thousands over FHA!

PMI rate plans are a good fit for different borrower situations:

A. Looking to lower the overall monthly payment?

Solution: PMI Super SingleSM is a one-time, upfront payment that can be paid in full at closing, paid with a seller contribution, financed into the loan amount, or a combination of these options.

PMI Super Single Chart

Benefit  over Kentucky FHA: Unlike FHA, there’s no monthly premium with Super Single, so the overall monthly mortgage payment is lower. Plus the borrower can save thousands over FHA based on the total MI obligation paid over 5 years. 

Selling tip: You can move homes faster by packaging Super Single with seller contributions up to 3% or up to 6% (depending on the market and the buyer’s down payment). The contribution can be used to help pay the one-time MI premium or both the MI and closing costs.
B. Looking to save cash at closing?

Solution: pmiNU MonthlySM reduces the overall MI obligation because there’s no upfront premium, unlike FHA – which will require an upfront premium of 1% – that must either be paid or financed into the loan amount.

pmiNU Monthly Chart

Benefits versus Kentucky FHA: Consider two facts:

  1. Interest will be paid over time on the added upfront premium on the Kentucky FHA loan amount, which increases the overall loan size, and
  2. P&I payments are based on the total loan amount times the interest rate.

1Minimum credit score is 680. In distressed markets, minimum credit scores are 680 for LTVs up to 90% and 720 for 95% LTV loans.

2 The numbers presented reflect the annualized premiums, which are billed monthly.

3 30% coverage, 30-year, 4.75% fixed-rate loan, Super Single Non-Refundable Plan, PMI and FHA upfront premiums are not financed, and FHA renewal premium is applied to amortizing balance over 5-year period.

4 30% coverage, 30-year, 6% fixed-rate loan, FHA upfront premium is financed.

Kentucky Private Mortgage Insurance or  PMI

Frequently Asked Questions

Tax-Deductibility Overview

Qualification

Reporting

Applying the Deduction Kentucky PMI’s Products


Q. What is mortgage insurance (MI) tax deductibility and how does it work?
A. The law provides for an itemized deduction on federal tax returns for the cost of private mortgage insurance paid by eligible borrowers. Prior to 2007, borrowers could not deduct the cost of their mortgage insurance payments. Now the law has been extended through 2011.

The federal law allows qualified borrowers with adjusted gross incomes up to $100,000 to deduct 100% of their
2007-2011 MI premiums on their federal tax returns.

The legislation is effective for borrower-paid premiums allocable to mortgage insurance certificates issued between 1.1.07 and 12.31.11.


Q. What is the reason for the MI tax-deductibility extension?
A. Expanding homeownership has long been a goal of the federal government. The federal government helps make homeownership more affordable for many homebuyers by making mortgage insurance tax-deductible, and the extension of the law will benefit even more homeowners.


Q. How long will this tax deduction be available?
A. The legislation specifies that the tax deduction applies to mortgage insurance certificates issued between 1.1.07 and 12.31.11, so it would include purchases and refinances within those years. However, Congress has the power to extend the tax deduction to future years, or even to make it permanent.


Q. Do all mortgage borrowers using mortgage insurance qualify for the Kentucky MI tax deduction?
A. Currently, this MI tax-deductibility legislation only applies to eligible borrowers with adjusted gross incomes of $109,000 or less who purchase or refinance a home in 2007-2011, and pay mortgage insurance premiums.

Borrower-paid mortgage insurance premiums allocable to 2007-2011 will be fully deductible for eligible taxpayers who are married, single or head-of-household and who earn up to $100,000. The amount of the deduction incrementally phases out for those who have adjusted gross incomes between $100,000 and $109,000 annually.


Q. What is the income threshold for married homeowners filing separately?
A. For married homeowners filing separately, there is a $50,000 adjusted gross income threshold per person. The MI tax deduction is reduced by 10% for each $500 that the married borrower’s adjusted gross income exceeds $50,000.


Q. Is the deduction only for Kentucky first-time homebuyers?
A. No.


Q. Does the MI tax deduction apply to new purchases only or are refinances included too?
A. The MI tax deduction applies to purchases and refinances up to the original loan amount. This could include first and second mortgages but not any cash out.


Q. Are there any occupancy restrictions?
A. The deduction applies to “qualified residence” as defined in the Internal Revenue Code. Generally that includes the taxpayer’s principal residence and up to one other residence selected by the taxpayer for purposes of the deduction for qualified residence interest. Note – the other residence must be used for personal purposes by the taxpayer for 14 days or 10% of the days during the tax year that the unit is rented for fair value, whichever is greater, among other criteria in the tax code.


Q. Are investor loans eligible?
A. No, investor loans are not eligible.


Q. Is there is a loan amount limit?
A. No. It is only limited by income of the taxpayer.


Q. Is deductibility applicable for all loan types?
A. There is no differentiation among loan types. But the premium has to be considered “acquisition indebtedness” on a “qualified residence.”


Q. Does the MI tax deduction apply to lender-paid mortgage insurance (LPMI)?
A. No. LPMI is a product in which the MI premiums charged to a lender are not passed on to the borrower in the escrow arrangement; instead, they are paid by the lender or are passed on to the borrower, if at all, via increases in the loan interest rate or other fees. Most mortgage interest is already deductible under the tax code.


Q. When refinancing a piggyback loan, for purposes of the deduction, is the original loan amount considered the sum of the two mortgages or only the primary mortgage amount without the second lien included?
A. The sum of the two mortgages.


Q. If the deduction is taken and subsequently the borrower receives a refund for MI premiums, is that refund taxable as income?
A. If the refund is for premiums that have not yet been deducted, as would generally be the case under the new provision when an upfront premium amount is amortized over the life of the mortgage insurance contract, the refund should not be taxable income to the borrower.


Q. Do tax deductions have to be itemized on tax returns in order to take the deduction?
A. Yes. In order to take advantage of the MI tax deduction, borrowers must include their MI premium payment information on their itemized tax returns.


Q. How does the deduction apply to PMI’s Super SingleSM premium in which the premium is either paid upfront or financed into the mortgage loan amount? Can the premium be deducted in one calendar year?
A. If the borrower paid a lump-sum mortgage insurance premium that pays for insurance coverage for a period potentially extending more than one year (such as for Super Single coverage), the deduction for a specific tax year typically is based only on the portion of the premium that pays for insurance for that year. This applies whether the lump-sum premium was paid upfront or financed into the loan amount. The portion of the lump-sum premium that is properly allocable to periods after the close of the taxable year are to be treated as paid in the period to which they are allocated. Thus, lump-sum premium payments must be amortized over the life of the mortgage insurance contract, and cannot be deducted in one calendar year.


Borrowers should consult their tax advisors concerning applicability of this deduction to their circumstances under the Internal Revenue Code and the laws of any other jurisdiction. This information is not intended or written to be used, and it cannot be used, for the purpose of avoiding U.S. federal, state or local tax penalties.

Kentucky Private Mortgage Insurance or  PMI

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