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Home › Forums › Housing › I believe Home Prices (Most Places in San Diego) reached bottom or almost bottom › esmith wrote: If he goes FHA

March 18, 2009 at 1:40 PM #369806
Scarlett
Participant

[quote=esmith]
If he goes FHA and puts 3.5% down, instead of doing conforming and putting 20% down, and he invests the difference (16.5% of purchase price) into CDs (returning 3% annually), he’ll receive the amount equal to 0.5% of house price per year in interest from CDs. Which is equal to what he pays in mortgage insurance to FHA.

Caveats:
– Interest from CDs is taxable, FHA mortgage insurance is not tax deductible
– FHA comes with an up front premium
– FHA has higher interest rates

[/quote]

Thanks esmith… Now when I read it again, it was clear… sorry, sleep deprived…
I guess it’s a question of comfort/peace of mind and how much you are willing to pay for that…if one would like to have more cash reserves, and not lose all the 20%down…In his case, 10% down and still paying some PMI and the rates may not be that much better than FHA it may not be that much worse going with the FHA. The upfront premium is the sucker.