Evening star., 1938-03-20
Building of F. H. A. Home
Is Very Simple Procedure
Letter or Postcard Will Start Machinery-Man
Desiring $500 Not Required to
Have Cash Payment

i - AAASAAls
there Is no authorized lending institution
In the neighborhood write to the Federal
Housing Administration at Washington or
its nearest field ONCE and they will put
you in touch with a lender.
Fourth. You will get from the bank a
printed form, to be filled out On this
form you must give all pertinent informa-
ton about your projected dwelling. and
about yourself, abou. the size and source Of
your income and the amount Of cash YOU
can put up, II any.
Fifth. Send this blank, filled out. 10 the
Federal Housing Administration at Wash.
ington, or to one Of its field offices. The
Housing Administration will assign an
agent to check on the applicants character.
his specifications for the house he wants.
and about the trustworthiness and COM
petence of the builder
Sixth If the agent makes q favorable
report, F. H. A. then notifies the bank that
1t may make the loan and that F. H. A.
will guarantee it. That Is, F. H. A. prom
ises the bank that If the borrower fails to
pay F. H. A. will make good.
Bank Takes Mortgage.
Seventh. The bank now turns the money
over to the borrower or to the builder. The
bank takes, In return, q mortgase on the
property. The bank deducts . small
amount for examination Of the property,
cost Of searching the title. recording the
deed, premium for fire insurance and the
like. The loan must be paid OF by regular
payments over q period Of 10 years or less.
The interest rate Is per cent on the whole
$2,50o; the true interest rate, on the
amount actually lent, will be about 81 per
cent. In addition, the borrower must pay
one-haf Of per cent annually to F. H. A.
for insurance against loss At the end of
10 years all payments will cease and the
borrower will own his, house free and clear.
In all this the prospective home owner
will wish to know how much cash he must
have to start with. Apparently hs need
not have any. say need not" The Fed
eral Housing Administration sets no fixed
standard. But F. H. A. passes on the ap-
plicant's character, standing and ability to
pay. In passing on the applicants quail
fications the F.. H. A. would presumably
favor an applicant who chas some money
and be dubious about an applicant who has
none.
Ownership Of Lot.
The prospective home owner will wish to
know whether he must own the land. the
lot upon which the house Is to be built, or
whether he can buy the lot with . part Of
his s2,50o loan. Apparently this, too. Is
flexible. Apparently 1t Is not essential that
the borrower should own his lot. But no
doubt F. H. A. would look more favorably
on prospective borrower who already owns
his lot.
$500, the procedure is, with one exception,
similar to that already described for $2,50O
houses. The top limit for residences for
which loans can be made is $4,000. The
main difference between the loans in this
field and those in the lower cost field Is
that for loan to build house costing over
$2,500 the prospective owner must have .
specified amount of cash of his own. He
must have 10 per cent Of the cost Of the
proposed house. For $4,000 house he
must have $500. For a $4,000 house he
must have $1,000. For q house costing
more than $4,000 and up to $4,000 he
must have $1,000 and In addition $40 for
each 500 borrowed above $4,000.
Twenty-Year Mortgages.
That Is, the prospective owner Of q SIS.
900 house must have $4,000 in cash of his
own to begin with. The mortgages on these
higher cost houses may run for 20 years
About this whole enterprise the question
Is, will 1t work? After ALL it is, up to the
present, only a prospectus-the plan Is just
getting under way. No doubt it will work
in the sense that many persons will take
advantage of it and build houses. But will
1t work in the sense that the houses will
be paid for, that the Government will not
lose any money?
1t will be observed that the Government
does not itself put up any cash-it merely
guarantees the banks which put up the
cash. Nothing is added to the national
debt, except as the Government may be
required to reimburse banks which are not
paid by the house owners
Small Insurance Charge.
The Government protects itself against
loss by small insurance charge. As this
insurance charge works out the Government
will be safe If not more than one borrower
out Of 20 fails to make good.
Those who have worked on this plan for
the Federal Housing Administration feel
confident it will be successful II 20, it will
be large asset on the credit side of the
New Deal. For this plan reduces the in
terest charge for financing new house to Q
little more than per cent And in the
ordinary practice Of building houses with
money borrowed from private lenders on
first and second mortgages the interest
charge is so large as to be almost prohib-
tive. Building houses for persons of small
means is not one Of the things the cap
italist system does best. II the capitalist
system built and sold houses as mex.
pensively and efficiently Is automobiles,
there would be no need for government to
step In.
Copyright 1888. New York Tribune, ine.)