Author Topic: FHA loan  (Read 2175 times)

rocko2527

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FHA loan
« on: June 27, 2015, 10:02:03 PM »
I plan to buy a house in the next two years and have been stuck on what would be the smartest move. Get an FHA loan and save about 25,000 on the downpayment and invest it?, or put the full 20% down to cut out pmi? I currently have 40k total saved 10 k of it invested in VTSAX. Me going the FHA route would mean i could invest another 15k into my account, and continue on investing 1600 a month for the next two years, until I buy a duplex to house hack. What would you do if you were me? 

MDM

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Re: FHA loan
« Reply #1 on: June 27, 2015, 11:02:11 PM »
What would you do if you were me?

1) Get all the numbers (base interest rate, PMI rate, PMI conditions, assumed market return, whatever else I'm forgetting now, etc.) together
2) Do the purely financial calculations
3) Overlay whatever subjective criteria (risk tolerance, general feelings, etc.)
4) Make a decision and go

forummm

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Re: FHA loan
« Reply #2 on: June 28, 2015, 06:05:03 AM »
PMI is so expensive on FHA loans now that I would be pretty surprised if deciding to optionally have PMI would make financial sense. And the cost of PMI in percentage terms increases as you pay down the loan. And you can't get rid of PMI very early with those loans. You're really stuck with keeping PMI or refinancing. Run the numbers, but you'll likely do better by getting a commercial loan--with or without PMI.

Bearded Man

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Re: FHA loan
« Reply #3 on: June 28, 2015, 07:54:36 AM »
What would you do if you were me?

1) Get all the numbers (base interest rate, PMI rate, PMI conditions, assumed market return, whatever else I'm forgetting now, etc.) together
2) Do the purely financial calculations
3) Overlay whatever subjective criteria (risk tolerance, general feelings, etc.)
4) Make a decision and go

This.

LLCoolDave

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Re: FHA loan
« Reply #4 on: June 28, 2015, 09:33:02 PM »
Mortgage Insurance Premiums (MIP) have changed dramatically in the last five years. I bought my house 6 years ago and the MIP was required for 5 years even if you had more than 20% equity. If you wanted to get rid of MIP before then you had to refinance to a traditional mortgage. Premiums have nearly doubled. I paid $70 per month on a $155k loan. My friend bought two years ago and pays $130 per month on $120k loan. He is also required to have MIP for the full 30 years. He must refinance if he ever wants it removed. If you have the cash I would not get an FHA loan.