With today’s real estate prices discounted 30%-50% from the highs of 2007, the opportunity for long term creation of wealth is a unique opportunity that will not last given the increase in prices in Southern California. Below outlines the creation of wealth based on a 4.0% 30 year fixed FHA purchase of a home and an annual growth value of just 3%. Home prices in Los Angeles County increased 15 % in the past 12 months, but we will use the 3% grown rate. (PMI = Principle Mortgage Insurance)

 

                                                   $300,000 Sales Price                      $350,000 Sales Price

Down Payment                                   $10,500                                               $  12,250

Loan Balance                                     289,500                                                 337,750

Up Front PMI (1.75%)                            5,066                                                     5,911 

New Loan Amount                             $294,566                                               $343,661

 

Monthly Mortgage Payment                    $1,406                                               $    1,641

Monthly PMI Ins (1.25%)                            307                                                        358

Monthly Prop Taxes                                313                                                        365

Home Insurance                                      65                                                           65

Total Monthly Payment                           $2,091                                               $   2,429

Creation of Wealth                                                               

Original Loan Amount                          $296,566                                              $343,661       

Loan Balance in 5 years                        268,237                                                310,833

New Value in 5 years at 3%/yr                347,782                                               405,746

Wealth Created                                $ 79,545                                             $  94,913