New FHA mortgage rules: good news and bad news for home buyers

For the last five decades, some 13 million American families have purchased homes with low-interest, low-down-payment mortgage loans insured by the Federal Housing Administration (FHA).

Now suddenly, the long-established FHA mortgage rules have changed, offering new advantages and disadvantages for today's home buyer.

You may have bought your first house 25 years ago with an FHA mortgage loan carrying a fixed (or maximum) interest rate that was a full percentage point less than the prevailing rate for conventional (non-government-backed) loans. Now if your son or daughter wants to buy an FHA-financed ''first house,'' he or she must negotiate the interest rate with the lender.

That means consumers will pay higher interest rates for FHA home loans this year. But looking at the total picture, that may not be entirely bad news for home buyers and sellers, because the new housing legislation that changed the method of determining FHA interest rates also reduces the required down payment for most home loans.

Only 3 percent of the home's appraised value, up to $50,000, is now required as down payment. Previously, down payments were 3 percent of the first $25,000, plus 5 percent of the amount over $25,000. As it now stands, the down payment on a $50,000 house is $1,500 instead of $2,000, as in the past.

Because of the previous below-market FHA maximum interest rates, lenders also charged ''discount points,'' a percentage of the loan. This cost was charged to the home seller, as dictated by law.

Many sellers, therefore, could either reject sales involving FHA financing, or pass the additional cost along to buyers in the form of higher home prices. In either case, many home buyers could not qualify for the resulting financing that was available for their home purchase.

For this reason, even though interest rates on new FHA-insured loans are now higher, the new rules should result in lower home prices, more families qualifying for FHA home financing, and more sellers willing to accept an FHA-financed sale of their property.

That will be the happy situation if lenders cooperate.

Now that they may charge the same rates as currently prevailing for conventional mortgage loans, there is really no reason to charge points. But the law does not restrict them from doing so.

It is common and proper for lenders to charge an ''origination fee'' when executing a new mortgage loan - usually 1 to 2 percent of the loan amount, which is charged to the borrower. But additional points are no longer justified for FHA loans, in the view of many leaders in the real estate industry.

In addition to affecting interest rates and down payments, the new housing legislation authorizes the FHA to insure adjustable-rate mortgages and a shared-appreciation mortgage that gives the lender a predetermined portion of future increases in the property's value in return for a lower interest rate.

Major real estate organizations are expressing mixed feelings about the new FHA rules, activated by passage of the Housing Recovery Act of 1983.

''We would have preferred a gradual transition,'' says Harry Pride, president of the National Association of Home Builders. ''We can only hope for the best under the new system.''

The National Association of Realtors asserts: ''Loans insured by the FHA will now be more affordable and available. The changes reflect recognition by Congress of the importance of FHA to home-mortgage finance.''

Some loan officers of large savings-and-loan associations express a surprising lack of knowledge about the new FHA loan rules.

''This is about average for FHA,'' one officer says. ''New rules and regulations are created to take effect immediately; then the FHA takes a couple of months to provide information for mortgagees (lenders).''

The new law does not apply to home loans guaranteed by the Veterans Administration. A similar VA program may be used, however, and announced in the near future, industry leaders predict.