Toward Better Houses

Out from Federal Housing Administration headquarters in Washington went a new directive to spur housing by drastically revising credit policies for buyers of houses with FHA-insured mortgages. The new policies are expected to double the number of potential purchasers of houses costing $15,000, while trebling the market for $20,000 homes. Said George Goodyear, president of the National Association of Home Builders: "This is good news for every builder. It removes one of the worst obstacles we have had to face."

In the past, local FHA offices normally considered that a prospective home buyer could afford to spend only about $1,000 a year plus a tenth of his after-taxes income above $3.000 on housing. Now FHA offices will approve credit applications in which $1,000 plus a fifth of income above $3,000 is budgeted for the mortgage, utilities and upkeep. Under the old standards, a buyer with an after-taxes income of $5,000 could not expect to qualify for an FHA-insured house costing more than $10,600 unless he had more than the minimum required down payment. Now such a prospective buyer can qualify for a $12,600 house.

Moreover, the relaxation extends up the income line--a $7,000-a-year man was limited to a $12,600 house, is now eligible for a $16,500 house; a $9,000-a-year man was confined to a $14,400 house, can now buy a $21,600 house. Furthermore, a wife's income, which was usually not taken into account, is now likely to be counted if she has a steady job.

Better Houses. Will the new credit rules encourage buyers to get in over their heads? Builders say no, that the new standards simply mark a return to the income requirements before World War II. Builders have long agitated for the change. Last March HOUSE & HOME ran an editorial calling FHA's income requirements "unreasonable and arbitrary," pointed out that FHA was encouraging consumers to buy inferior houses. As a result, FHA Commissioner Norman Mason appointed an industry advisory committee, whose recommendations led to the new standards.

In easing up on income requirements, Mason gave a bright green light to builders to pack more quality into houses. The new directive specifically instructs FHA local offices that "no otherwise acceptable" credit application for a house costing more than $12,000 is to be turned down because the builder spent "a few hundred dollars" putting in better wiring, insulation or wide roof overhangs. Such quality items, said Mason, actually cut down on house maintenance costs. Likewise, complete kitchens were okayed for houses over $12,000. Where builders in the past had to leave out appliances because they ran the initial cost too high, buyers went right out and bought them on short-term credit at higher interest. Selling the house complete, said Mason, really makes the buyer a better credit risk.

Air Conditioning. But the biggest equipment change will be in air conditioning. In the past, FHA offices frequently demanded that home buyers have an extra $1,000 of annual income if a house had summer cooling. But builders say it takes no more income to maintain a house with combined winter heating and summer cooling than one with a furnace only. The extra operating expense in summer is offset by savings in cleaning, health and equipment upkeep. Henceforth, Mason ordered, anticipated operating expense of summer cooling should not disqualify buyers of houses costing $15,000 or more. In fact, "FHA should start encouraging the inclusion of air conditioning. Within a few years, any house that is not air conditioned will probably be obsolescent."

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