I'm closing on a house in a few days with an FHA loan that has a hefty mortgage insurance. As I understand it, once I reach 78% loan-to-value of the initial sales price or appraised value of the home (whichever is lower), and after 5 years, I can drop the monthly mortgage insurance premiums (since the loan also includes an upfront mortgage insurance premium).
So with the goal of achieving that as soon as possible, it occurred to me that I could have the seller increase the sale price by the amount of the closing costs, and throw in a concession for seller to pay that amount on closing costs. If I do that, the initial sales price will be greater (but still under the recently appraised value--we're getting a good deal). So my LTV will start out lower, and I think that means with the same payments I can reach 78% LTV faster.
Is that sound, or is my logic flawed?