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I ran a minimum down against a minimum down for both programs to compare side-by-side payment and closing costs. If you throw in the UFMIP as a cost (it is, you just don't pay it in cash), the combo is close to dead even, even with the additional 1.5% down. Now that the FHA insurance will go up again in April and June, the 80/15/5 will blow the doors off the FHA. I also compared a 10% (80/10/10) to another 10% down FHA, and again, no contest.
If the borrower(s) makes more than a 100K a year the PMI won't be tax deductible. Currently on a 300K loan, the up front MIP is $3000 and as of April 9, it will be $5250. And while it can be financed, it can't be ignored, because the mortgage balance is now $5250 higher in a payoff. On that same 300K loan, the monthly MI is $287, which will now jump to $312 per month.
Sorry, I have to disagree, the FHA borrower is throwing $3400 (@ $287 per month) a year away. Never make a financial decision on how to unload an asset. Many that bought in 2010 would have found themselves upside down on an assumable mortgage at a higher rate. Nothing will ever replace a fair sales price. The first year out in my example (after April 9), the buyer is already 9K out of pocket.
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