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YOUR MORTGAGE : Little-Known FHA Loan Programs : Financing: In addition to the more familiar 5% down payment program, the agency offers others that serve people with more modest incomes.


Most Americans are familiar with the Federal Housing Administration's loan program that lets would-be home buyers purchase a house with a 5% down payment.

But what many people don't realize is that the FHA operates several other loan programs that offer attractive financing terms to buyers and homeowners alike.

"We have a bunch of different programs, but a lot of people just don't know about them," said Bill Glavin, a spokesman in the FHA's Washington headquarters.

Some lenders say many people don't even ask about FHA loans because they figure that they make too much money to qualify for a government-backed mortgage.

But unlike many programs run by state and local governments, you don't have to meet "maximum income" standards to get most types of FHA loans. In fact, you could qualify for one of these cut-rate mortgages even if you make more than $100,000 a year.

More than 80% of the loans that the FHA insures are made through the U.S. Housing and Urban Development's "203-b" program. It's the simplest type of FHA loan to understand: You make a down payment as small as 5%, you get a fixed-interest rate and the mortgage is paid off in 30 years.

More than 15 million Americans have bought homes under the 203-b program since the FHA was formed in the 1930s.

But another loan program operated by the FHA--known as the "245" program--is even more attractive to many borrowers, especially to those of rather modest means.

An FHA 245 loan is a graduated-payment mortgage. It starts out with a below-market interest rate, and payments gradually rise over the first five years.

For example, Pasadena-based Countrywide Funding Corp. offers FHA 245 loans with an introductory rate of 7 3/4%. The rate eventually rises to 9 3/4%, where it stays for the life of the loan.

"The low introductory rate on the 245 loan makes it a lot easier to get than a typical mortgage," said Ralph Mozilo, Countrywide's executive vice president.

As an example, Mozilo said, a borrower seeking a $100,000 mortgage under the well-known 203-b program would have to make about $36,000 a year to qualify for a loan at the going rate of 9 1/2%. Monthly payments for principal and interest would be $841.

A borrower who instead opted for the little-known 245 program would only have to earn about $28,800 a year to qualify because of the loan's 7 3/4% introductory rate. Monthly payments would start out at $718, rising gradually to $878 five years from now.

"A 245 loan is an especially good loan for younger people who aren't making a whole lot of money now, but who expect their earnings to rise steadily over the years," Mozilo said. "Their income growth should keep pace with the increases in their mortgage."

Since lenders who make FHA 245 loans actually lose money in the early years of the mortgage, they typically charge a slightly higher rate when the loan "matures" than they do on standard FHA loans.

For example, the rate on Countrywide's 245 loans eventually hits 9 3/4%. You would pay 9 1/2% if you took the more popular 203-b loan.

Another drawback to FHA 245 loans is that in the early years of the mortgage, the outstanding loan balance actually gets bigger instead of smaller with each monthly payment. By giving you such low initial rates, the lender is essentially subsidizing your payments in the early years but tacking that subsidy on to your outstanding loan balance.

This so-called "negative amortization" shouldn't bother you if you plan on staying in the house for several years. It disappears after the interest rate reaches 9 3/4%, at which time your loan starts being amortized--paid off--just like any other mortgage.

But if you must move within a few years of taking out a 245 loan, you might actually lose money because the value of your home might not rise as fast as the outstanding balance of your mortgage.

The maximum amount you can borrow under both the 203-b and 245 programs is $124,875. That's enough to get a small condominium in most pricey coastal markets, or a single-family home in inland areas.

Other little-known FHA loan programs include:

* "Title I" home-improvement loans. Under this program, current homeowners can borrow up to $25,000 to fix their house up. Although rates on these loans are typically a bit lower than rates on standard home-improvement loans, they're difficult to find and up-front costs are sometimes high.

* The 203-k program. These loans are made to people who "substantially rehabilitate" their homes. They, too, carry an interest rate that's lower than conventional rates and are geared primarily toward low- or moderate-income people who own houses in sore need of repair.

* The 235 loan-program. Available only to the poor, this program provides government subsidies to first-time buyers.

Mortgage bankers and mortgage brokers are often the best sources of information on FHA loans. Many large banks and savings and loan associations don't make the full array of FHA mortgages, in part because they provide similar loans without the government's help.

Of course, you can also get more information about the loans from the nearest regional office of the Federal Housing Administration. You'll find it under the "United States Government" section in the white pages of your local phone book.

AVERAGE RATES FOR RESIDENTIAL MORTGAGES Average rates for residential mortgages as of Nov. 23, 1990.

Survey Conventional Mortgages Adjustable Mortgages Area 15 Year 30 Year Composite 1 Year Composite National 9.69% 9.99% 9.86% 8.00% 8.30% California 9.94 10.23 10.09 8.33 8.29 Connecticut 9.70 10.04 9.90 8.09 8.30 Wash. D.C. 9.53 9.85 9.71 7.63 8.01 Florida 9.72 10.00 9.87 7.98 8.25 Mass. 9.75 10.05 9.91 8.12 8.52 New Jersey 9.69 9.97 9.85 7.90 8.33 N.Y. Metro 9.78 10.07 9.94 8.05 8.40 New York 9.89 10.17 10.05 8.17 8.50 N.Y. Co-ops 10.11 10.36 10.27 8.44 8.79 Pa. 9.42 9.76 9.59 7.63 7.76 Texas 9.44 9.77 9.62 7.96 8.12

SOURCE: HSH Associates, Butler, N.J.

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