fha isn’t really the “new subprime” — it may actually be the smart way to make money on real estate in the next 10 years. maybe the only way, if prices are flat. and in a way it makes sense, since one isn’t really buying a home, one is buying a mortgage. the financial decision has less to do with the layout of the house than the features of the loan. what i get for my 20% down is a loan i cannot sell. I wouldn’t buy a house I cannot transfer — why would I buy a loan I could not transfer, unless I was greatly conpensated for that lack of flexibility?

fha is not the new subprime in this sense; when I think subprime, i think unqualified buyers — but fha is qualifying income…

also, subprime has a big interest rate penalty — no so with fha.

i know ive been through this analysis before on fha v. conventional, and run numbers extensively, but i was only analyzing the oppty costs of my down payemnt, and the penalties associated with the fha loan….i wasn’t thinking about the value of an assumable loan in a spiking interest rate environemnt. I’m not sure about anything, but i am willing to bet there is a large spike in us interest rates sometime in the next 15 years, and i know i’ll want or at leats be willing to sell this house sometime in the next 15 years….

am I overthinking this?

yeah.

Is there any value to my thinking about this?

to me, yes…

ok, so, if payments go up 10% for every 100 bps increase, then if interest rates hit 15% — and I bet they will at some point — a $2,000 house payment will be $4,000. Say the price is flat or even down, but the paymennt is way up. I will have an “asset” (the fha loan) which is worth twice as much as it was previously worth, even in the face of crappy appreciation. it’s not really an asset, obviously, since it’s debt, but it has a super desireable interest rate which is worth a lot.

what am I missing, people? Why in the heck would anyone in his right mind put down 20% unless he was going to pay the loan for sure the full 30 years?