“According to your answer, I think you stated I should take the 4200 upfront fee and divide it by 84 (shorter of 84 month and 360 month loan term) and then multiply by payments in 2010 - (12 payments).” ---->Correct; If you paid a lump-sum premium for insurance provided by FHA or a private mortgage insurer that also covers years after 2008, you must determine the portion of the premium that pays for insurance for 2008 by dividing the total premium by the stated term (number of months) of your mortgage, or 84 months, whichever is shorter.
“ Now with that number I should put it with the monthly fee number I already have in line 13 of schedule A? “---->Correct; you put your FHA upfront fee ( annual ) with the amount on Box4 of 1098.
“That upfront FHA fee wouldn't go in line 12? “---->No; you must report Points Not Reported on Form 1098 on Sch A line 12. That upfront FHA fee’d go in line 13.
“Also, the loan origination fee paid by the seller that I will divide by 360 (life of loan) and then multiply by the 2010 payments (12) goes on line 12 right? Of course, it isn't on any 1098 either.”---->Correct.
“Is there any instance where I don't get to deduct that loan origination fee? “---->I guess so. But, I am not sure as I have no any idea about your situation in detail.
Please visit the IRS website here for further info; Publication 936 (2010), Home Mortgage Interest Deduction
“ I know it was separate of other fees, and I put down 6500 at closing, more than the 2200 loan origination fee.”-----> Closing costs are made up of a laundry list of various charges. They include things like lenders fees, real estate appraisals costs, private mortgage insurance, homeowners insurance, recording fees, title searches and title insurance, as well as many other possible costs. The unfortunate truth is that most of these fees are not deductible except PMI as said above. There are a few exceptions however. These depend on when exactly you buy your house. For example, if you have to pre-pay any mortgage interest as part of your closing costs, that interest will be tax deductible. You may have to prepay if you close on any day other than the first of the month. This is typically the day your future mortgage payments will be due and if your home loan closes on the 15th perhaps, then your lender will require you to prepay interest for the 15 days before the next month begins. Since this is still interest, even though it is included in your closing costs you can deduct it from your yearly tax returns.