The requirements for Home Mortgage Interest to be deductible changed several years ago.
Basically the main change involved this-
at one time you could borrow against your home and all interest could be claimed (you could pay down credit cards or purchase a car with the cash taken out)
now, only interest in respect to your home may be used (build, purchase or improve)
There is also now a limit on the amount you can borrow.
The information needed to make this determination is not listed on the 1098
The information needed to make this determination is asked for during the interview in the 1098 section.
Therefore, when you enter the 1098, you must answer the questions which follow in a way to let the program know if all the interest is deductible or not.
If you answer that the loan is the original loan, the program knows that all the interest is deductible (because the original loan is for the purchase of the home) as long as the loan is not over the limit.
If you answer that this is NOT the original loan, you need to tell the program what you did with the new loan. If you simply refinanced and did not take out cash, again the interest would be allowed (if below the loan limit).
If you refinanced, took out cash and used the cash for any purpose other than adding value to the home (improve) the portion of the interest attributed to this amount of cash taken out would not be eligible.
It is a complicated calculation, but hopefully if you have a better understanding of what the program is trying to learn, you may better understand the interview questions.
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