[quote=scaredycat]use wife’s credit?[/quote]
Assuming your wife makes as much as you, then that would be a decent plan B. If you think price will drop another 20% where you plan to buy and you’ll walk w/in 5-8 years, then it doesn’t matter if PMI/MMIP doesn’t end after 5 years, it’s still cheaper to go the FHA route. If it doesn’t drop 20% down or if your time frame changed to 10+ years, then that would totally change the calculation. What’s the chances we’ll see 20+% depreciation in the next 5-8 years in the price range you’re looking to buy. That’s the question you have to ask yourself. I still think rent and build up an even bigger down payment/cash reserve would be a better option if your plan is to only stay there for 5-8 years (unless inflation start to pick up and price starts to head north).
Regarding PMI/MMIP, if price keep on falling and LTV doesn’t get to 80% for a very long time, is there a time limit for PMI/MMIP?
Here are some scenario and # for you to chew over. Assuming the house is $400k, rates for conventional is 4.75% and rates for FHA is 5.375% w/ 1.5% upfront cost roll into the loan and 0.5% MMIP. If price drop 20% in 8 years, it’ll be ~$26k cheaper to go w/ the FHA route. If price stayed flat over the next 8 years, it’ll be ~$53k cheaper to go w/ the conventional. If price increased 20% over the next 8 years, it’ll be ~$119k cheaper to go w/ the conventional loan. I did not take tax deduction into consideration. It might add a few grand in the FHA favor but it wouldn’t change the overall picture. FHA seems to be a good idea, only if you HAVE to buy now and plan to walk after 5-8 years and price drop. If you don’t have to buy now, rent would be a better option.
