Mortgage incentives for civil servants one step closer
By Michael D. Larson • Bankrate.com

April 12, 2000 -- House lawmakers passed a bill last week designed to make it easier and cheaper for teachers, police officers and other civil servants to buy homes with the assistance of Federal Housing Administration mortgages.

The American Homeownership and Economic Opportunity Act of 2000, which has now moved on to the Senate, lowers down payment and mortgage insurance requirements on FHA loans. The bill has a good chance of becoming law in one form or another, backers say, considering House legislators voted for it 417-8.

"A home is more than just a roof over someone's head. It is the centerpiece of a family's life," says Rick Lazio, R-N.Y., the legislation's original sponsor. "Our bill today is a bipartisan effort, cosponsored by members of Congress on both sides of the aisle who wish to provide more Americans with the opportunity of homeownership."

Less money down
The bill will modify the Department of Housing and Urban Development's FHA loan program in several ways. But among the provisions of most interest to teachers, police officers, firefighters and emergency medical technicians is one that will lower the FHA down payment requirement for them to 1 percent from 3 percent.

The legislation also allows HUD to defer the FHA insurance premium typically charged at closing. The premium usually amounts to 2.25 percent of an FHA loan's principal. But under the act, it will shrink by one-fifth for each year the civil servant lives in the home. Someone who remains five years or more won't have to pay it at all.

Addition to existing programs
Both provisions should make life even easier for cops and teachers, who already can benefit from existing government programs. HUD lets them buy homes it has repossessed through foreclosure for half price and only $100 down in communities it wants to revitalize, for example.

Still, those hoping to take advantage of the new requirements will have to wait for the wheels of Congress to turn some more. The House bill has to be reconciled with a separate housing proposal in the Senate before President Clinton can sign anything. That probably won't happen until late summer or early fall, experts say.