Getting Married? Uncle Sam Has a House for You

It may seem unusual, but the federal government wants to help young newlyweds get a very nice wedding present.

No, President Clinton isn't offering a toaster to go with his middle-class tax cut. And no, Senate majority leader Trent Lott is not sealing his capital-gains tax-cut proposal with a frying pan.

Instead, the Department of Housing and Urban Development is hawking a program during this busy wedding season that lets young couples open bridal registries at lenders approved by the Federal Housing Administration (FHA).

Similar to the tradition of bridal registries at department and specialty stores, the Bridal Registry Accounts - established last October - allow friends and family members to put cash wedding presents into a bank account. The money will then earn interest and eventually go toward the down payment on a home bought with an FHA mortgage.

The program seems tailor-made for young middle-income couples like Leslie Scott and Robert Sizemore - two federal government employees who are planning a September wedding.

"When it comes time to register for gifts, we plan on, of course, going to Macy's and Tiffany's, but the first stop will be to our bank to open a bridal registry account," Ms. Scott says. "We don't want a blender or an ice-cream-maker. What we want - and need - is a house."

Of course, some couples receive cash as a wedding gift. But the relatively new program is intended to help couples quash the urge to spend the wedding-gift nest egg on something else.

The FHA's program is also part of an effort to help promote home ownership among young families, which has been on the decline since the 1980s. The Clinton Administration's goal is home ownership for 67.5 percent of the population by 2000. The national rate now is 65.4 percent; among households under age 35, it's 58.8 percent.

"The bridal registry is still a pretty new concept, but it's catching on," says the FHA's Gayela Bynum.

So far, 36 lenders with thousands of branches across the country are offering bridal accounts, and the Department of Housing and Urban Development expects hundreds more lenders to sign up.

But no wedding, it seems, comes off without a hitch. The FHA limits the size of the mortgages it underwrites to $157,000 in the nation's most expensive markets, like New York and San Francisco; the limit is as low as $78,000 in other areas. But there are no income limitations to the loan program.

FHA loans also have down payment requirements as low as 3 percent, which may sound great to newlyweds who don't receive enough in cash gifts to make a 10 or 20 percent down payment. Down payments of less than 20 percent, though, generally require private mortgage insurance, which can add $30 to $50 a month to mortgage payments.

According to the agency, most people who take advantage of FHA loans are first-time home buyers, young couples, minorities, or immigrants.

"In some cases, these accounts aren't for everyone," says Marc Myers, the editor of Moneysworth, a financial newsletter in Greenwich, Conn. "It all depends on how long you plan to keep the money in the account."

Interest rates are set by the individual banks, rather than by the FHA, and those rates may range from 3 percent to 5.25 percent, depending on the balance. Most financial planners advise that couples should not keep the money in the registry accounts if they plan to wait more than a few months to buy their home.

"Instead, they should shop around - even for a six-month CD [certificate of deposit] - which would pay more than these accounts," says Mr. Myers.

Gift-givers should know that the FHA program does not require couples to use the money in the accounts for a down payment on a house. They can withdraw the money whenever they want and use it for whatever they want.

If you don't buy a house, however, you may have to answer to your puzzled friends and relatives.

The bride and groom should also be aware that if they decide to buy a home with the money, they are under no obligation to apply for a mortgage with the lender offering the registry.

The Bridal Registry Account program was first advanced in Denver by Universal Mortgage Corp., an FHA-approved mortgage lender that formed a partnership with Colorado National Bank to initiate the program.

Savings accounts are set up at the bank and mortgages are handled by Universal. The partners became convinced of the validity of the idea after reading that more newlyweds would become home buyers if they had the money to make the down payment. That thinking proved very prescient - so far 123 accounts have been opened in the Denver area by Universal.

But not everyone loves the idea.

"It's kind of tacky," says Denise Brock, browsing at a Crate & Barrel store in Bethesda, Md. "I understand that there are couples that can use the money more. But I think an individually purchased gift personalizes the whole gift-giving process."

Leslie Scott disagrees. "It's no tackier than receiving yet another blender, and it will certainly give us a leg up on buying a house."