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How to Make a Low Down Payment Loan Work for You

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(ARA) – As spring home buying season begins, financing options remain available for borrowers who do not have the traditional 20 percent down payment.

‘Even with home prices declining in many areas, many families still find it difficult to accumulate a 20 percent down payment,’ says Suzanne Hutchinson, executive vice president of the Mortgage Insurance Companies of America. ‘Low down payment insured loans are a key financial tool in the overall effort to keep the dream of homeownership alive in a volatile market.’

Although the real estate market is tumultuous, there are still safe, predictable and responsible financing options for buying a home. ‘Most are better off because the risky, exotic loans have largely disappeared from the market, and also fortunate because more secure loans with tax-deductible private and government mortgage insurance are still available for qualified borrowers,’ says Bruce Hahn, president and CEO of the American Homeowners Grassroots Alliance.

And Congress is helping many buyers with a federal income tax deduction for mortgage insurance premiums on home purchases or refinancing starting in 2007. This is the first-ever tax deduction for government and private mortgage insurance.

The tax deduction was first approved by Congress in late 2006 and applied to loans with mortgage insurance that closed in 2007. In an important move to further assist borrowers, Congress voted in December of last year to extend the mortgage insurance tax deduction through 2010 as part of the Mortgage Forgiveness Debt Relief Act of 2007.

The deduction allows households with an adjusted gross income of $100,000 or less to deduct the full cost of their government or private mortgage insurance premiums on their federal tax returns. Families with incomes between $100,000 and $109,000 are eligible for a reduced deduction. On average, the tax break could be worth $350 per taxpayer.

Approval of the tax deduction by Congress — and extending it through 2010 — was strongly supported by a number of consumer, civic, African American and Hispanic groups.

‘Making the cost of mortgage insurance tax deductible helps those who need it most: low- and moderate-income Americans, primarily first-time home buyers, who are financially responsible but simply don’t have the means to amass a 20 percent down payment,’ Hutchinson says.

Buying a home is usually the biggest financial decision for any family. With riskier mortgage financing options, such as interest-only loans and piggyback mortgages, quickly fading from the marketplace, low down payment loans with mortgage insurance remain readily available for qualified borrowers.

An added benefit is that private mortgage insurance can be canceled when the home owner builds up sufficient equity in the home, with nine in 10 borrowers canceling private mortgage insurance within 60 months.

For more information on tax deduction and home loans with low down payments visit

Courtesy of ARAcontent