FHA loans; why not?

[an]

[quote=scaredycat]the appreciation is a gain for FHA or 20%. in order to meaningfully compare the 20% v FHA, have to take out gain/flat from the equation.[/quote]
Why would you take out gain/flat out of the equation, yet leave decline? Are you 100% sure price will fall by 20% by the time you want to move in 8 years? Wouldn’t you want to calculate all the scenarios? You also just brought up 11 years vs 8 years, that change the calculation quite a bit as well.

[an]

Sorry, I made a mistake when doing my comparison last night, here are the correct #’s:
FHA:
20% decline over 8 years:
$158,101.62 (8 years of interest) – $0(equity) + 14k (down payment) = $172101.62 (total cost of living in it for 8 years)

flat over 8 years:
$158,101.62 (8 years of interest) – $60723.87(equity) – 14k (down payment) = $83377.75 (total cost of living in it for 8 years)

20% increase over 8 years:
$158,101.62 (8 years of interest) – $140723.87(equity) – 14k (down payment) = $3377.75 (total cost of living in it for 8 years)

Conventional:
20% decline over 8 years:
$113,342.30 (8 years of interest) – $46907.76(equity) + 80k (down payment) = $146434.54 (total cost of living in it for 8 years)

flat over 8 years:
$113,342.30 (8 years of interest) – $126907.76(equity) – 80k (down payment) = -$93565.46 (total cost of living in it for 8 years)

20% increase over 8 years:
$113,342.30 (8 years of interest) – $206907.76(equity) – 80k (down payment) = -$173565.46 (total cost of living in it for 8 years)

As you can see, it’s cheaper to put down 20% even if you expect to lose 20% over 8 years. If your time frame is shorter, 3-5 years, FHA might be cheaper, but if your time frame is longer, ~11 years, conventional is definitely the way to go.

[an]

Sorry, I made a mistake when doing my comparison last night, here are the correct #’s:
FHA:
20% decline over 8 years:
$158,101.62 (8 years of interest) – $0(equity) + 14k (down payment) = $172101.62 (total cost of living in it for 8 years)

flat over 8 years:
$158,101.62 (8 years of interest) – $60723.87(equity) – 14k (down payment) = $83377.75 (total cost of living in it for 8 years)

20% increase over 8 years:
$158,101.62 (8 years of interest) – $140723.87(equity) – 14k (down payment) = $3377.75 (total cost of living in it for 8 years)

Conventional:
20% decline over 8 years:
$113,342.30 (8 years of interest) – $46907.76(equity) + 80k (down payment) = $146434.54 (total cost of living in it for 8 years)

flat over 8 years:
$113,342.30 (8 years of interest) – $126907.76(equity) – 80k (down payment) = -$93565.46 (total cost of living in it for 8 years)

20% increase over 8 years:
$113,342.30 (8 years of interest) – $206907.76(equity) – 80k (down payment) = -$173565.46 (total cost of living in it for 8 years)

As you can see, it’s cheaper to put down 20% even if you expect to lose 20% over 8 years. If your time frame is shorter, 3-5 years, FHA might be cheaper, but if your time frame is longer, ~11 years, conventional is definitely the way to go.

[an]

Sorry, I made a mistake when doing my comparison last night, here are the correct #’s:
FHA:
20% decline over 8 years:
$158,101.62 (8 years of interest) – $0(equity) + 14k (down payment) = $172101.62 (total cost of living in it for 8 years)

flat over 8 years:
$158,101.62 (8 years of interest) – $60723.87(equity) – 14k (down payment) = $83377.75 (total cost of living in it for 8 years)

20% increase over 8 years:
$158,101.62 (8 years of interest) – $140723.87(equity) – 14k (down payment) = $3377.75 (total cost of living in it for 8 years)

Conventional:
20% decline over 8 years:
$113,342.30 (8 years of interest) – $46907.76(equity) + 80k (down payment) = $146434.54 (total cost of living in it for 8 years)

flat over 8 years:
$113,342.30 (8 years of interest) – $126907.76(equity) – 80k (down payment) = -$93565.46 (total cost of living in it for 8 years)

20% increase over 8 years:
$113,342.30 (8 years of interest) – $206907.76(equity) – 80k (down payment) = -$173565.46 (total cost of living in it for 8 years)

As you can see, it’s cheaper to put down 20% even if you expect to lose 20% over 8 years. If your time frame is shorter, 3-5 years, FHA might be cheaper, but if your time frame is longer, ~11 years, conventional is definitely the way to go.

[an]

Sorry, I made a mistake when doing my comparison last night, here are the correct #’s:
FHA:
20% decline over 8 years:
$158,101.62 (8 years of interest) – $0(equity) + 14k (down payment) = $172101.62 (total cost of living in it for 8 years)

flat over 8 years:
$158,101.62 (8 years of interest) – $60723.87(equity) – 14k (down payment) = $83377.75 (total cost of living in it for 8 years)

20% increase over 8 years:
$158,101.62 (8 years of interest) – $140723.87(equity) – 14k (down payment) = $3377.75 (total cost of living in it for 8 years)

Conventional:
20% decline over 8 years:
$113,342.30 (8 years of interest) – $46907.76(equity) + 80k (down payment) = $146434.54 (total cost of living in it for 8 years)

flat over 8 years:
$113,342.30 (8 years of interest) – $126907.76(equity) – 80k (down payment) = -$93565.46 (total cost of living in it for 8 years)

20% increase over 8 years:
$113,342.30 (8 years of interest) – $206907.76(equity) – 80k (down payment) = -$173565.46 (total cost of living in it for 8 years)

As you can see, it’s cheaper to put down 20% even if you expect to lose 20% over 8 years. If your time frame is shorter, 3-5 years, FHA might be cheaper, but if your time frame is longer, ~11 years, conventional is definitely the way to go.

[an]

Sorry, I made a mistake when doing my comparison last night, here are the correct #’s:
FHA:
20% decline over 8 years:
$158,101.62 (8 years of interest) – $0(equity) + 14k (down payment) = $172101.62 (total cost of living in it for 8 years)

flat over 8 years:
$158,101.62 (8 years of interest) – $60723.87(equity) – 14k (down payment) = $83377.75 (total cost of living in it for 8 years)

20% increase over 8 years:
$158,101.62 (8 years of interest) – $140723.87(equity) – 14k (down payment) = $3377.75 (total cost of living in it for 8 years)

Conventional:
20% decline over 8 years:
$113,342.30 (8 years of interest) – $46907.76(equity) + 80k (down payment) = $146434.54 (total cost of living in it for 8 years)

flat over 8 years:
$113,342.30 (8 years of interest) – $126907.76(equity) – 80k (down payment) = -$93565.46 (total cost of living in it for 8 years)

20% increase over 8 years:
$113,342.30 (8 years of interest) – $206907.76(equity) – 80k (down payment) = -$173565.46 (total cost of living in it for 8 years)

As you can see, it’s cheaper to put down 20% even if you expect to lose 20% over 8 years. If your time frame is shorter, 3-5 years, FHA might be cheaper, but if your time frame is longer, ~11 years, conventional is definitely the way to go.

[scaredyclassic]

ok, but…go with the 20% loss over 8 years example. I’m ahead $25,000 for leaving my $66,000 with the bank for 8 years. That’s less than 40%…so my actual gain on my down payment is probably about 4% or less compounded? that’s not good.

your fha claculations look right, but the 20% ones look odd. does the quity include the down payment? are you counting that twice?

[scaredyclassic]

ok, but…go with the 20% loss over 8 years example. I’m ahead $25,000 for leaving my $66,000 with the bank for 8 years. That’s less than 40%…so my actual gain on my down payment is probably about 4% or less compounded? that’s not good.

your fha claculations look right, but the 20% ones look odd. does the quity include the down payment? are you counting that twice?

[scaredyclassic]

ok, but…go with the 20% loss over 8 years example. I’m ahead $25,000 for leaving my $66,000 with the bank for 8 years. That’s less than 40%…so my actual gain on my down payment is probably about 4% or less compounded? that’s not good.

your fha claculations look right, but the 20% ones look odd. does the quity include the down payment? are you counting that twice?

[scaredyclassic]

ok, but…go with the 20% loss over 8 years example. I’m ahead $25,000 for leaving my $66,000 with the bank for 8 years. That’s less than 40%…so my actual gain on my down payment is probably about 4% or less compounded? that’s not good.

your fha claculations look right, but the 20% ones look odd. does the quity include the down payment? are you counting that twice?

[scaredyclassic]

ok, but…go with the 20% loss over 8 years example. I’m ahead $25,000 for leaving my $66,000 with the bank for 8 years. That’s less than 40%…so my actual gain on my down payment is probably about 4% or less compounded? that’s not good.

your fha claculations look right, but the 20% ones look odd. does the quity include the down payment? are you counting that twice?

[an]

[quote=scaredycat]ok, but…go with the 20% loss over 8 years example. I’m ahead $25,000 for leaving my $66,000 with the bank for 8 years. That’s less than 40%…so my actual gain on my down payment is probably about 4% or less compounded? that’s not good.

your fha claculations look right, but the 20% ones look odd. does the quity include the down payment? are you counting that twice?[/quote]
No, I did not count the down payment, since it would be wiped out by the 20% drop. After 8 years of principal payment, your loan balance would be $273,092.24. I subtract that from $320k to get the equity value.

With FHA, your loan balance after 8 years would be $339,276.13. That’s greater than $320k, which is why I put $0 for equity in FHA scenario, since you’re walking away.

I don’t see how you would be coming out ahead w/ FHA. The cost difference is $25667.08. That’s without adding in the monthly difference in payment, which would be $62688 over 8 years. Do you think your $66k (difference in down payment) can make $88355.08 (134%) over 8 years? Assuming you’re not investing $62688 as well.

[an]

[quote=scaredycat]ok, but…go with the 20% loss over 8 years example. I’m ahead $25,000 for leaving my $66,000 with the bank for 8 years. That’s less than 40%…so my actual gain on my down payment is probably about 4% or less compounded? that’s not good.

your fha claculations look right, but the 20% ones look odd. does the quity include the down payment? are you counting that twice?[/quote]
No, I did not count the down payment, since it would be wiped out by the 20% drop. After 8 years of principal payment, your loan balance would be $273,092.24. I subtract that from $320k to get the equity value.

With FHA, your loan balance after 8 years would be $339,276.13. That’s greater than $320k, which is why I put $0 for equity in FHA scenario, since you’re walking away.

I don’t see how you would be coming out ahead w/ FHA. The cost difference is $25667.08. That’s without adding in the monthly difference in payment, which would be $62688 over 8 years. Do you think your $66k (difference in down payment) can make $88355.08 (134%) over 8 years? Assuming you’re not investing $62688 as well.

[an]

[quote=scaredycat]ok, but…go with the 20% loss over 8 years example. I’m ahead $25,000 for leaving my $66,000 with the bank for 8 years. That’s less than 40%…so my actual gain on my down payment is probably about 4% or less compounded? that’s not good.

your fha claculations look right, but the 20% ones look odd. does the quity include the down payment? are you counting that twice?[/quote]
No, I did not count the down payment, since it would be wiped out by the 20% drop. After 8 years of principal payment, your loan balance would be $273,092.24. I subtract that from $320k to get the equity value.

With FHA, your loan balance after 8 years would be $339,276.13. That’s greater than $320k, which is why I put $0 for equity in FHA scenario, since you’re walking away.

I don’t see how you would be coming out ahead w/ FHA. The cost difference is $25667.08. That’s without adding in the monthly difference in payment, which would be $62688 over 8 years. Do you think your $66k (difference in down payment) can make $88355.08 (134%) over 8 years? Assuming you’re not investing $62688 as well.

[an]

[quote=scaredycat]ok, but…go with the 20% loss over 8 years example. I’m ahead $25,000 for leaving my $66,000 with the bank for 8 years. That’s less than 40%…so my actual gain on my down payment is probably about 4% or less compounded? that’s not good.

your fha claculations look right, but the 20% ones look odd. does the quity include the down payment? are you counting that twice?[/quote]
No, I did not count the down payment, since it would be wiped out by the 20% drop. After 8 years of principal payment, your loan balance would be $273,092.24. I subtract that from $320k to get the equity value.

With FHA, your loan balance after 8 years would be $339,276.13. That’s greater than $320k, which is why I put $0 for equity in FHA scenario, since you’re walking away.

I don’t see how you would be coming out ahead w/ FHA. The cost difference is $25667.08. That’s without adding in the monthly difference in payment, which would be $62688 over 8 years. Do you think your $66k (difference in down payment) can make $88355.08 (134%) over 8 years? Assuming you’re not investing $62688 as well.

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