| What happens when you sell/refnance?
There are two stipulations for getting out of the loan..
So lets assume you DO get to participate (yay!):
When you sell or refinance, you have to pay a 3% fee to the FHA based on the mortgage balance . It is unclear to me whether this is based on the original mortgage amount or what you might have paid it down to.
Second, you owe a percentage of profits to the government. It is a sliding scale, and if you stay in the house for 5 years, you will always owe 50% of the profits.
So let's do a hypothetical:
You have a mortgage balance of $300,000 after participating in the program. In 5 years the home is worth $350,000. You refinance.
You will owe $9,000 to the FHA (unless it is based on remaining mortgage balance, then it would be less), plus $25,000 in profits. You would owe $34,000 in order to refinance at this stage. The other lender would most likely require 20% equity, so your balance would need to be down to $290,000 in order to meet this requirement.
So, in 5 years, you pay $34,000 to get out underneath the government's heel. In return you'll pay the market rates without FHA insurance (let's say ~6.5%), so you'll save money. Plus at this point you would have no further obligation to the government and could keep any further appreciation.
Hope this helps.
ccsint |