Proposed new FHA purchase in SD, CA using new loan limit of $729,750 (with $12771 MIP escrow deposit):

$748,450 purch price (no HOA or MR)
$ 18,700 3.5% downpayment

$729,750 Mortgage at 4% fixed

P&I = $3480.91
Taxes = 729.74
Ins = 161.17 (non fire-risk area)
MIP = 401.36

Total $4773.18 (mo PITI + MIP)

Amount of MIP deposited (assuming all pymts are timely made):

by 13th month of ownership = $17,587.64
by 25th month of ownership = $22,403.96
by 37th month of ownership = $27,220.28

Is this enough cash to protect HUD (another acronym for “gubment”) if this borrower should default in these first three critical years??

I don’t think so. Assuming the loan doesn’t go bad until the 37th month, $27,220.28/$3,480.91 = 7.82 months of P&I in “reserves.” And this doesn’t even cover late fees, trustees fees, unpaid taxes, insurance and clean up/maintenance on the REO!

And I’ve never met a HUD home that took less than nine months to get there. In recent years it has taken up to three years for an FHA mortgage to foreclose.

I don’t think I need to ask here who will end up footing this bill …. :=0