"Everyone is entitled to their opion I respect that. I just don't agree. "
You are entitled to your opinion, you are just not entitled to give terrible mortgage advice to a borrower especially since you don't have the license to do so.
" If interest rates go up the buyer is in a very good position if they decide to sell. Why not use someone elses money at less than 4% interest and then make it availble to your buyer at a later date?"
So you expect the borrower to over pay every month so in the event they sell, their potential borrower can get a great rate? And that is your advice? You apparently are unaware that conforming mortgage rates are low as well.
Let's do some math.
200K Mortgage, 20% down conventional conforming
Let's just use a 3.75% rate for both FHA and Conventional as they are both available now.
FHA 3.5% down
Loan amount including UFMIP = $194,930
Principal and interest payment = 902.75
MI = 183.41
Payment not including Taxes and insurance = 1086.16
Conforming 20% down
Loan amount = $160,000
Principal and interest payment $740.98
Payment not including taxes and insurance = 740.98
After 5 years:
Conforming: The borrower will have paid $84,458.80 ($44,458.80 in payments / $40,000 in down payment). They will have a payoff of $144,413.40 on their home after 5 years of scheduled payments.
FHA: The borrower will have paid $71,738.32 ($54,165.00 in payments / $10,573.32 in MI / $7000 in down payment). They will have a payoff of $175,940.65 on their home after 5 years of scheduled payments.
$12,720.58 More invested in conforming loan after 5 years.
$31,527.25 more equity after 5 years when they sell
In your expert opinion, please tell me where they can invest $12,720.58 over 5 years and get a 248% return on their investment?
Please tell me why you are suggesting they pay $10,573.32 in mortgage insurance over the next 5 years.
In the above example, if they do not sell, they will continue to make mortgage payments for a total of 9 years of scheduled payments and the numbers get even more staggeringly in favor of conforming.