[SDEngineer]

[quote=jpinpb]SDEngineer – thanks for all the info. With the way the economy stands right now, I’m thinking I may go the FHA way – if I do find something I like in my area or that add up/makes sense. [/quote]

I’d still wait if you are buying close to the coast – haven’t seen much there that would make sense.

The rule of thumb we were using was the house price should be no more than 180x the monthly rent (gross rent multiplier) it would bring in (for a 380K place, you should at least be able to rent it for 2100+ – at $1800 a month fair market rent, it’s a GRM of about 210, well above historical ratios still). Preferably lower, 180x is a bit on the high side historically, but manageable (especially with the low rates today). It would be better to get it around or below 150x. Typically, I believe investors look for a 100x-150x gross rent multiplier (lower bounds cash flow immediately, higher bounds largely pay for themselves as long term investment properties).

Ours is new construction, which is usually more expensive to buy (but cheaper for quite a few years to maintain, and will also be more energy efficient as well). Our gross rent multiplier is about 165-175 (depending on whether you count the substantial incentives the builder is throwing in). Still a bit on the high side, but no longer on the ridiculously high side, and given the low rates, we decided it was reasonable to buy at this point.

Two years ago, the GRM on what we are buying would probably have been around 260.

[SDEngineer]

[quote=Scarlett][quote=esmith]
If he goes FHA and puts 3.5% down, instead of doing conforming and putting 20% down, and he invests the difference (16.5% of purchase price) into CDs (returning 3% annually), he’ll receive the amount equal to 0.5% of house price per year in interest from CDs. Which is equal to what he pays in mortgage insurance to FHA.

Caveats:
– Interest from CDs is taxable, FHA mortgage insurance is not tax deductible
– FHA comes with an up front premium
– FHA has higher interest rates

[/quote]

Thanks esmith… Now when I read it again, it was clear… sorry, sleep deprived…
I guess it’s a question of comfort/peace of mind and how much you are willing to pay for that…if one would like to have more cash reserves, and not lose all the 20%down…In his case, 10% down and still paying some PMI and the rates may not be that much better than FHA it may not be that much worse going with the FHA. The upfront premium is the sucker.

[/quote]

Exactly. My point wasn’t that it was free (all esmith’s caveats are correct), just that it costs less than it appears at first glance. Though I think mortgage insurance is now deductible if you meet the income limitations (we don’t), though I suppose that may apply to PMI only, not the FHA’s program.

Rates for conventional are not much better than FHA – the rates I’ve been seeing are less than a quarter point difference, if that. The upfront premium is the big catch, but that’s really the only one – FHA mortgage insurance is cheaper than PMI on a annual basis outside of the upfront premium.

[SDEngineer]

[quote=Scarlett][quote=esmith]
If he goes FHA and puts 3.5% down, instead of doing conforming and putting 20% down, and he invests the difference (16.5% of purchase price) into CDs (returning 3% annually), he’ll receive the amount equal to 0.5% of house price per year in interest from CDs. Which is equal to what he pays in mortgage insurance to FHA.

Caveats:
– Interest from CDs is taxable, FHA mortgage insurance is not tax deductible
– FHA comes with an up front premium
– FHA has higher interest rates

[/quote]

Thanks esmith… Now when I read it again, it was clear… sorry, sleep deprived…
I guess it’s a question of comfort/peace of mind and how much you are willing to pay for that…if one would like to have more cash reserves, and not lose all the 20%down…In his case, 10% down and still paying some PMI and the rates may not be that much better than FHA it may not be that much worse going with the FHA. The upfront premium is the sucker.

[/quote]

Exactly. My point wasn’t that it was free (all esmith’s caveats are correct), just that it costs less than it appears at first glance. Though I think mortgage insurance is now deductible if you meet the income limitations (we don’t), though I suppose that may apply to PMI only, not the FHA’s program.

Rates for conventional are not much better than FHA – the rates I’ve been seeing are less than a quarter point difference, if that. The upfront premium is the big catch, but that’s really the only one – FHA mortgage insurance is cheaper than PMI on a annual basis outside of the upfront premium.

[SDEngineer]

[quote=Scarlett][quote=esmith]
If he goes FHA and puts 3.5% down, instead of doing conforming and putting 20% down, and he invests the difference (16.5% of purchase price) into CDs (returning 3% annually), he’ll receive the amount equal to 0.5% of house price per year in interest from CDs. Which is equal to what he pays in mortgage insurance to FHA.

Caveats:
– Interest from CDs is taxable, FHA mortgage insurance is not tax deductible
– FHA comes with an up front premium
– FHA has higher interest rates

[/quote]

Thanks esmith… Now when I read it again, it was clear… sorry, sleep deprived…
I guess it’s a question of comfort/peace of mind and how much you are willing to pay for that…if one would like to have more cash reserves, and not lose all the 20%down…In his case, 10% down and still paying some PMI and the rates may not be that much better than FHA it may not be that much worse going with the FHA. The upfront premium is the sucker.

[/quote]

Exactly. My point wasn’t that it was free (all esmith’s caveats are correct), just that it costs less than it appears at first glance. Though I think mortgage insurance is now deductible if you meet the income limitations (we don’t), though I suppose that may apply to PMI only, not the FHA’s program.

Rates for conventional are not much better than FHA – the rates I’ve been seeing are less than a quarter point difference, if that. The upfront premium is the big catch, but that’s really the only one – FHA mortgage insurance is cheaper than PMI on a annual basis outside of the upfront premium.

[SDEngineer]

[quote=Scarlett][quote=esmith]
If he goes FHA and puts 3.5% down, instead of doing conforming and putting 20% down, and he invests the difference (16.5% of purchase price) into CDs (returning 3% annually), he’ll receive the amount equal to 0.5% of house price per year in interest from CDs. Which is equal to what he pays in mortgage insurance to FHA.

Caveats:
– Interest from CDs is taxable, FHA mortgage insurance is not tax deductible
– FHA comes with an up front premium
– FHA has higher interest rates

[/quote]

Thanks esmith… Now when I read it again, it was clear… sorry, sleep deprived…
I guess it’s a question of comfort/peace of mind and how much you are willing to pay for that…if one would like to have more cash reserves, and not lose all the 20%down…In his case, 10% down and still paying some PMI and the rates may not be that much better than FHA it may not be that much worse going with the FHA. The upfront premium is the sucker.

[/quote]

Exactly. My point wasn’t that it was free (all esmith’s caveats are correct), just that it costs less than it appears at first glance. Though I think mortgage insurance is now deductible if you meet the income limitations (we don’t), though I suppose that may apply to PMI only, not the FHA’s program.

Rates for conventional are not much better than FHA – the rates I’ve been seeing are less than a quarter point difference, if that. The upfront premium is the big catch, but that’s really the only one – FHA mortgage insurance is cheaper than PMI on a annual basis outside of the upfront premium.

[SDEngineer]

[quote=Scarlett][quote=esmith]
If he goes FHA and puts 3.5% down, instead of doing conforming and putting 20% down, and he invests the difference (16.5% of purchase price) into CDs (returning 3% annually), he’ll receive the amount equal to 0.5% of house price per year in interest from CDs. Which is equal to what he pays in mortgage insurance to FHA.

Caveats:
– Interest from CDs is taxable, FHA mortgage insurance is not tax deductible
– FHA comes with an up front premium
– FHA has higher interest rates

[/quote]

Thanks esmith… Now when I read it again, it was clear… sorry, sleep deprived…
I guess it’s a question of comfort/peace of mind and how much you are willing to pay for that…if one would like to have more cash reserves, and not lose all the 20%down…In his case, 10% down and still paying some PMI and the rates may not be that much better than FHA it may not be that much worse going with the FHA. The upfront premium is the sucker.

[/quote]

Exactly. My point wasn’t that it was free (all esmith’s caveats are correct), just that it costs less than it appears at first glance. Though I think mortgage insurance is now deductible if you meet the income limitations (we don’t), though I suppose that may apply to PMI only, not the FHA’s program.

Rates for conventional are not much better than FHA – the rates I’ve been seeing are less than a quarter point difference, if that. The upfront premium is the big catch, but that’s really the only one – FHA mortgage insurance is cheaper than PMI on a annual basis outside of the upfront premium.

[SDEngineer]

[quote=esmith][quote=AN]
Thanks for correcting me. I always though RB belong to Poway city. But it seems like 4S is not part of San Diego City.[/quote]

The transition from RB to Poway is so seamless that it’s hard to tell where one begins and the other ends. Henry’s on Bernardo Heights / Pomerado is still in San Diego, but houses across the street are already in Poway.

4S is unincorporated county and, as such, does not get to participate in city elections, and does not have to worry about any fiscal mess the city finds itself in. San Diego could, in principle, raise sales taxes or property taxes to pay its debt, and it would affect RB but not 4S.[/quote]

I did not know that, thanks esmith. I figured since it was in W. RB’s zip code it would have been incorporated automatically.

Here’s a map of San Diego County (not very detailed) showing all the incorporated areas. Looks like I was wrong on La Jolla as well – they appear to be solidly a part of San Diego City.

http://en.wikipedia.org/wiki/File:San_Diego_County_California_Incorporated_and_Unincorporated_areas_San_Diego_Highlighted.svg

[SDEngineer]

[quote=esmith][quote=AN]
Thanks for correcting me. I always though RB belong to Poway city. But it seems like 4S is not part of San Diego City.[/quote]

The transition from RB to Poway is so seamless that it’s hard to tell where one begins and the other ends. Henry’s on Bernardo Heights / Pomerado is still in San Diego, but houses across the street are already in Poway.

4S is unincorporated county and, as such, does not get to participate in city elections, and does not have to worry about any fiscal mess the city finds itself in. San Diego could, in principle, raise sales taxes or property taxes to pay its debt, and it would affect RB but not 4S.[/quote]

I did not know that, thanks esmith. I figured since it was in W. RB’s zip code it would have been incorporated automatically.

Here’s a map of San Diego County (not very detailed) showing all the incorporated areas. Looks like I was wrong on La Jolla as well – they appear to be solidly a part of San Diego City.

http://en.wikipedia.org/wiki/File:San_Diego_County_California_Incorporated_and_Unincorporated_areas_San_Diego_Highlighted.svg

[SDEngineer]

[quote=esmith][quote=AN]
Thanks for correcting me. I always though RB belong to Poway city. But it seems like 4S is not part of San Diego City.[/quote]

The transition from RB to Poway is so seamless that it’s hard to tell where one begins and the other ends. Henry’s on Bernardo Heights / Pomerado is still in San Diego, but houses across the street are already in Poway.

4S is unincorporated county and, as such, does not get to participate in city elections, and does not have to worry about any fiscal mess the city finds itself in. San Diego could, in principle, raise sales taxes or property taxes to pay its debt, and it would affect RB but not 4S.[/quote]

I did not know that, thanks esmith. I figured since it was in W. RB’s zip code it would have been incorporated automatically.

Here’s a map of San Diego County (not very detailed) showing all the incorporated areas. Looks like I was wrong on La Jolla as well – they appear to be solidly a part of San Diego City.

http://en.wikipedia.org/wiki/File:San_Diego_County_California_Incorporated_and_Unincorporated_areas_San_Diego_Highlighted.svg

[SDEngineer]

[quote=esmith][quote=AN]
Thanks for correcting me. I always though RB belong to Poway city. But it seems like 4S is not part of San Diego City.[/quote]

The transition from RB to Poway is so seamless that it’s hard to tell where one begins and the other ends. Henry’s on Bernardo Heights / Pomerado is still in San Diego, but houses across the street are already in Poway.

4S is unincorporated county and, as such, does not get to participate in city elections, and does not have to worry about any fiscal mess the city finds itself in. San Diego could, in principle, raise sales taxes or property taxes to pay its debt, and it would affect RB but not 4S.[/quote]

I did not know that, thanks esmith. I figured since it was in W. RB’s zip code it would have been incorporated automatically.

Here’s a map of San Diego County (not very detailed) showing all the incorporated areas. Looks like I was wrong on La Jolla as well – they appear to be solidly a part of San Diego City.

http://en.wikipedia.org/wiki/File:San_Diego_County_California_Incorporated_and_Unincorporated_areas_San_Diego_Highlighted.svg

[SDEngineer]

[quote=esmith][quote=AN]
Thanks for correcting me. I always though RB belong to Poway city. But it seems like 4S is not part of San Diego City.[/quote]

The transition from RB to Poway is so seamless that it’s hard to tell where one begins and the other ends. Henry’s on Bernardo Heights / Pomerado is still in San Diego, but houses across the street are already in Poway.

4S is unincorporated county and, as such, does not get to participate in city elections, and does not have to worry about any fiscal mess the city finds itself in. San Diego could, in principle, raise sales taxes or property taxes to pay its debt, and it would affect RB but not 4S.[/quote]

I did not know that, thanks esmith. I figured since it was in W. RB’s zip code it would have been incorporated automatically.

Here’s a map of San Diego County (not very detailed) showing all the incorporated areas. Looks like I was wrong on La Jolla as well – they appear to be solidly a part of San Diego City.

http://en.wikipedia.org/wiki/File:San_Diego_County_California_Incorporated_and_Unincorporated_areas_San_Diego_Highlighted.svg

[SDEngineer]

[quote=AN][quote=SDEngineer]
Actually, RB is part of San Diego City. It’s about the furthest flung part though.
[/quote]
Thanks for correcting me. I always though RB belong to Poway city. But it seems like 4S is not part of San Diego City.[/quote]

4S is part of San Diego City as well. You cross out of San Diego city limits when you cross the I-15 bridge north over Lake Hodges, or east into Poway. Pretty much everything to the south and west of the I-15 (as well as some stuff to the east of the I-15) until you hit the 94 is San Diego City, except La Jolla, Del Mar, and Rancho Santa Fe.

[SDEngineer]

[quote=AN][quote=SDEngineer]
Actually, RB is part of San Diego City. It’s about the furthest flung part though.
[/quote]
Thanks for correcting me. I always though RB belong to Poway city. But it seems like 4S is not part of San Diego City.[/quote]

4S is part of San Diego City as well. You cross out of San Diego city limits when you cross the I-15 bridge north over Lake Hodges, or east into Poway. Pretty much everything to the south and west of the I-15 (as well as some stuff to the east of the I-15) until you hit the 94 is San Diego City, except La Jolla, Del Mar, and Rancho Santa Fe.

[SDEngineer]

[quote=AN][quote=SDEngineer]
Actually, RB is part of San Diego City. It’s about the furthest flung part though.
[/quote]
Thanks for correcting me. I always though RB belong to Poway city. But it seems like 4S is not part of San Diego City.[/quote]

4S is part of San Diego City as well. You cross out of San Diego city limits when you cross the I-15 bridge north over Lake Hodges, or east into Poway. Pretty much everything to the south and west of the I-15 (as well as some stuff to the east of the I-15) until you hit the 94 is San Diego City, except La Jolla, Del Mar, and Rancho Santa Fe.

[SDEngineer]

[quote=AN][quote=SDEngineer]
Actually, RB is part of San Diego City. It’s about the furthest flung part though.
[/quote]
Thanks for correcting me. I always though RB belong to Poway city. But it seems like 4S is not part of San Diego City.[/quote]

4S is part of San Diego City as well. You cross out of San Diego city limits when you cross the I-15 bridge north over Lake Hodges, or east into Poway. Pretty much everything to the south and west of the I-15 (as well as some stuff to the east of the I-15) until you hit the 94 is San Diego City, except La Jolla, Del Mar, and Rancho Santa Fe.

[Author]

Posts