VA/FHA-backed mortgages offer special advantages

With interest rates dropping and prospective home buyers shopping once again, many people are learning that the 30-year, fixed-rate mortgage is not the thing of the past that some may believe.

The most popular of these mortgages comes from a source with some experience in the field: the US government. For people taking on no more than a $90,000 mortgage (which is enough for a modest home in many parts of the country), mortgages backed by the Federal Housing Administration (FHA) and the Veterans Administration (VA) currently have several advantages:

* Right now, with a 121/2 percent interest rate, FHA-VA mortgages are probably the cheapest available home loans. This rate has dropped from 15 percent in the last six weeks or so, and some experts believe rates may drop a little further.

While the decline in FHA-VA rates is good news to those eligible for these loans, it is a sign of even better news for the entire housing industry. FHA-VA rates often lead overall mortgage rates, and this time was no exception. Many banks and saving-and-loans are quoting rates of 131/2 to 14 percent, some three or four points lower than earlier this year.

* There is no prepayment penalty with an FHA-VA loan, so if mortgage rates drop further, you can refinance the mortgage at a lower rate. And you don't have to wait one to three years to do it; you can refinance and cut the monthly payments anytime you like. You may, however, have to pay additional closing costs and fees for a reappraisal of your home.

* The loan is assumable; so when it comes time to sell the house, the buyers can take over your old loan, making it easier for you to sell and easier for the new owners to afford.

* Eligibility is easy. For a VA loan, of course, you have to be a veteran of the US armed forces. For an FHA loan, you just have to be a US citizen.

* The down payment is low. On an FHA-backed loan, it can be as low as 5 percent. For a VA loan, it can be zero percent down.

* These are not ''creative'' home loans. That makes FHA and VA loans attractive to many home buyers put off by the mysteries of ''balloons,'' variable rates, and ''buy-downs.'' They just keep the same monthly payments for 30 years, or as long as the family lives in the house.

Like any ''good deal,'' there are some hitches to getting an FHA or VA mortgage, but for those eligible, the low cost makes them worthwhile.

As mentioned before, the maximum mortgage the FHA will guarantee is $90,000. And that's for a multifamily house. For a single-family, the FHA limit is $67, 500.

''This is not a program for the higher-priced homes,'' says John J. Sousa, president of Commonwealth Mortgage Company in Boston. ''This is a program for Middle America.'' It is particularly good for people buying their first home, people who thought high mortgage rates had frozen them out of the housing market , he said.

For many of these first-time home buyers, Mr. Sousa added, the FHA or VA mortgage is just right for buying a condominium, the modern version of the starter home. ''The condo of today is the single-family slab house of 20 years ago,'' he says.

There is more paper work and more time involved in getting an FHA-or VA-backed mortgage. If a conventional loan from a bank or savings institution takes two or three weeks to be approved, plan on an additional two or three weeks for an FHA or VA loan. Often this means mortgage companies, rather than banks, are more likely to be writing FHA and VA loans, because they are used to the extra paper work.

Some mortgage companies, in fact, may be offering mortgages backed by the FHA and the VA that carry rates of less than 121/2 percent. By packaging some older, assumable mortgages, many mortgage bankers are able to offer 15-year loans with rates a percentage point or two lower.

Depending on where you get an FHA- or VA-guaranteed mortgage, you may have to pay more ''points.'' Each point represents 1 percent of the outstanding balance, and some lenders are charging as much as eight points. On a $60,000 loan, that would mean coming up with $4,800 in addition to the down payment. Lenders also charge points when homes are refinanced at lower interest rates. Commodity funds for an IRA

Are there any publicly offered commodity funds that are set up as suitable for retirement investing in a self-directed individual retirement account (IRA)? -- J. P. There are a few of these mutual funds, and you can get their names from a broker or financial planner. However, I would argue against using them for an IRA. As one broker said: ''This is the money you're going to be living on when you retire. If you want to play around and speculate, do it with some other money.''

Of all the types of mutual funds, commodity funds are probably the riskiest. Some commodity funds, in fact, protect themselves against this risk by requiring investors to have a high net worth (perhaps $25,000), in addition to their salaries, homes, cars, and furnishings. Speculation in commodities is a zero-sum game: What you win, someone else loses, or vice versa (minus commissions). You may, however, expect to have enough additional income at retirement that you are willing to take extremely high risks with your IRA money.

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