[quote=HLS]
With a decent credit score and 10%-20% down, I don’t think there is any reason to use FHA.
30 YR fixed rates closed yesterday at 4.75% with no points or as low as 4.375% with one point, about the lowest ever. 5YR-7YR ARMS are below 4% Qualifying is tougher than it has even been. With an additional cost the same rates are available on rental properties as well…HLS[/quote]
FHA blows those rates away. According to this site, you can get a 5/1 Year ARM on a $500,000 at 4.023% APR and the fees are only $1,371:
The monthly payment is $2,387. That site doesn’t show the down payment, but presumably you could do the 3% and use DPA and have the seller pay it.
The payment for your conventional loan on a $450,000 amount with $50,000 down at 4.75% is $2,347.
With the FHA loan, you would have that $50,000 down to invest in something. If you wanted to play it really safe, you could put that $50,000 into a 1-year CD paying 1.88%. That would give you an extra $78 guaranteed. Subtracting that amount from the FHA payment leaves you with a net payment of $2309.
So with FHA you have a cheaper monthly payment and don’t have to put anything down. Then, just stop paying before the reset, and (1) negotiate a principal/monthly payment reduction with the government, (2) Hire an attorney to try and keep you in your house as long as possible payment-free, or (3) just save the monthly payment until you get evicted.
What’s the benefit of conventional over FHA again?
