There are various kinds of first mortgages now being used to assist in financing the purchase of a country home.  One of the oldest is the purchase money type.  This is given the seller as part of the total price paid by the buyer.  Formerly such mortgages were for a short term, three or five years, and payable in full at the end of that period.  Now some of them are for longer periods and provide for monthly amortization charges by which the mortgage is paid in full by the end of the time specified.

The Federal Housing Administration mortgages, which are a recent New Deal endeavor to make funds for home buying or building safe and stable, are issued by local banks with the payment of interest and principle guaranteed to the bank through the operation of this government controlled agency.  These mortgages are amortized over periods of ten, fifteen, and twenty years and the borrower must make specified monthly payments that include taxes, interest charges, and amortization.  They are not available in all sections because some local banks hold that they conflict in details with other banking regulations.  So far as the borrower is concerned, these mortgages are no different from any other similar method of financing.  If payments are not made regularly and promptly, foreclosure proceedings will be started.

Large insurance companies or savings and loan associations also issue fifteen to twenty year first mortgages, amortized over the period by monthly, quarterly, or semi-annual payments.  The interest rate varies from five to five and a half per cent.  If such a mortgage is arranged for a new house, architect’s plans and specifications must be submitted with the application for loan.  The site must be free and clear of all mortgages or other obligations.  Your own financial rating is looked up by the lender and, if satisfactory, the company issues a commitment that you can take to your local bank where definite amounts are paid as the work progresses; so much when exterior walls are complete; such a proportion when rough piping for plumbing has been installed; another amount when all lath and plaster has been finished; and so on until the final payment when the house is finished.  Then the formal mortgage is executed and recorded.  There are brokers who specialize in negotiating such mortgages.  Their fee is about two per cent.

So much for the usual channels of financing.  In addition, the buyer can still make his own mortgage arrangements with some investor who has money to loan if he knows such a person.  Further, although second mortgages should be avoided if possible, they are sometimes issued where a buyer is considered a good risk but lacks sufficient capital to meet the fifty per cent cash requirement that prevails today.  Such loans are not usually made for over twenty per cent of the appraised value and generally call for a higher rate of interest, six per cent.  They are also apt to be for a short term, two or three years, when they must be paid in full.