- The Washington Times - Thursday, October 7, 2004

The mortgage community is populated with hundreds of loan programs.

There are loans for different types of buyers, including those who want to put a little or no money down; those who just want to sign on the bottom line and keep their personal financial information private; and those who are interest-conscious and want rates that are fixed, adjustable or interest-only.

There are also loan programs designed for certain types of properties. Conforming loans are so called because they conform to a predetermined set of standards so they can be sold on the secondary market. They have a whole list of parameters for how they can be used. They may require, for instance, that the borrower move into the property and that the property is a single-family dwelling rather than a condominium.

The type of property you purchase could limit the type of financing you desire.

So if you shop online for mortgages or dash to the phone to call in on that great rate, remember that the rate or program you’re looking at may be for a traditional 30-year mortgage to purchase a traditional home dwelling, which provides the least amount of risk to the lender.

If you’re considering financing for raw land, for instance, you’re not going to be looking at a 30-year, fixed-rate mortgage at 5.75 percent with a very low down payment.

In fact, if the raw land has no improvements whatsoever, you may even have to make a substantial down payment, such as 30 to 50 percent, if you’re talking with a traditional bank.

A land loan presents higher risk to an investor or bank because of the ease of walking away from the property. Owner financing, however, may provide you with more flexibility, a lower down payment and smaller interest rate.

Here are a few other types of properties that have programs designed specifically for their purchase:

• Manufactured home. About 8 percent of the U.S. population lives in manufactured homes, also called mobile homes or house trailers, although the latter two names have fallen from favor.

In 2001, the average sales price of these dwellings was $48,800, not including the lot, according to the Manufactured Home Institute. However, when it comes to purchasing these dwellings, it might take two loans to get the transaction complete.

MHI’s consumer site, www.factorybuilthousing.com, details how the two loans required involve a personal-property loan for the manufactured home and a real-property loan for the land if you don’t own the lot already. The personal-property-loan rate is going to be 2 to 3 percentage points higher than the real-property mortgage.

m New construction. If you’re looking to build your home on a lot, then you’ll be looking at a construction loan, which is usually an interest-only product that becomes payable once you obtain the certificate of occupancy for your new property. In essence, once it comes due, you would refinance the property to include the lot and the final construction costs in one loan, secured by the finished product — your house and lot.

m Fixer-upper. The U.S. Department of Housing and Urban Development has a product called the 203(k). The 203(k) is designed for the purchaser who wants to buy a fixer-upper that a traditional lender may not want to finance because of its condition. If you want to use this program, you must state in your contract that you’re going to use this loan and must get approval from the Federal Housing Authority before the transaction is finalized. For more information, search for the 203(k) at www.hud.gov.

m Multifamily housing. Financing for multifamily units has its own subcategory in the mortgage industry.

Most investors will be pleasantly surprised to find that there is plenty of money out there from lenders who want to invest with purchasers of multifamily dwellings.

For deeper details about how these programs work, visit the HUD Web site and click through the various links about the program types. The full address is www.hud.gov/offices/hsg/mfh/progdesc/progdesc.cfm.

You’ll find programs for rental housing, manufactured-home parks, redevelopment loans for refurbishing multifamily units as you purchase them, and rental housing for the elderly and nursing homes.

As you research your real estate investing options, don’t forget to look at the financing as thoroughly as you seek out the real property. Without financing, most transactions won’t happen.

M. Anthony Carr has written about real estate for more than 15 years. Contact him by e-mail ([email protected]erols.com).

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