Do You Remember FHA-235's?

Real Estate Agent with Prudential Towne Realty

I remember buying my first house back in the late 80's. We didn't qualify for a conventional loan however, we purchased a home that was under the FHA-235 program. The house payments were based on income allowing more families who otherwise could not purchase a home, to do so. I felt so lucky because it was a major stepping stone to selling and purchasing my "dream home".

This program has disappeared but WOW! Wouldn't it be nice to have it back now?

Because of lenders tightening up qualifications etc. fewer people are qualifying and when they do, I'm finding they qualify for much less!

I think this could possibly stimulate the housing market even more! What do you think?


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Lou Ludwig
Ludwig & Associates - Boca Raton, FL
Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC

Hi Bonnie

The FHA 235 mortgage program is what the market needs today to help the buyers and lower the inventory levels.

Good luck and success

Lou Ludwig

Nov 12, 2008 04:30 AM #1
Bonnie Tegge
Prudential Towne Realty - Virginia Beach, VA

Hi Lou,

I agree 100% - would love to see more people push to bring this program back!

Nov 12, 2008 04:46 AM #2
Gene Allen
Fathom Realty - Cary, NC
Realty Consultant for Cary Real Estate

I remember it but not the details but it would probably be a good idea about now.

Nov 13, 2008 08:12 AM #3
l hotaling

Hi, back in 1982 we purchased our home thru fha 235 program and then in 1991 we refinanced our mtg. and years later took out a home equity loan. Now we only have a small amount left on our mtg and want to refinanced to do work on our house. the problem is that there is still a lien from hud and I have called them and they have no record of this and not sure what to do. I have all the receipts and everything of what we have done with our house but was told today that I would not even be able to sell as that is there. If anyone could help it would be greatly appreciated. Thanks

Mar 02, 2009 08:10 AM #4
Bonnie Tegge

Hi I hotaling,

I would recommend going up the line with HUD until you can find someone who is willing to help you. If they have no record of any lien, they need to provide a letter of such and stating that the lien needs to be released. I'm sure there must be many others in the ActiveRain forum that have great recommendations as well! Call me if you are still having trouble-I might be able to help you find someone with the expertise to get this done!

Mar 02, 2009 10:04 AM #5

I remember it.

While I was struggling to pay a non-subsidized mortgage, my next door neighbor was bragging about his $62 house payment (while he had new furniture, new car, etc. that I couldn't afford). 

The 235 program was a disaster; an expose' into government meddling into private business.  It resulted in thousands of homes being abandoned when the owner would get a raise in pay and the house payment would rise as a result. 

Please, no more government subsidies that are unfair to tax payers and perpetuate dependence on those of us that work hard, save, and buy what we can afford. 



Mar 03, 2009 03:34 AM #6
Bonnie Tegge

Hi Ken,

I appreciate your candid response! Yes, there were many (like with anything!) that took advantage of the program - not as a stepping-stone to move forward to conventional homeownership, but to take advantage of the subsidy and very low payments, much like those who take advantage of the Welfare system!

I see others now, who qualified for a mortgage last year and would've been fine that now qualify for much less or don't qualify at all! These are people who pay their bills on time, work etc. and had good credit but, when lenders started cutting limits, these people, who had a considerably low debt ratio with their credit, ended up with HIGH RATIOS, rates that sky-rocketed and often-times, these companies would close their accounts inevitably dropping their scores as well!

This program had many loopholes on the other side as well. Contractors would go into blighted homes, do a "cover-up" fix on the properties, get them in the program and those who bought these homes ended up with disasters-some homes that had to be condemned!

I just hope you can see both sides of the story! There are many responsible people out there that deserve home-ownership and this program (if loopholes and stricter guidelines were mandated) start them into the right direction...could possibly absorb some of the many empty foreclosed properties that drop property values down further.

Mar 03, 2009 04:03 AM #7

I remember the 235 program. In my South Carolina neighborhood, when they began building the homes in our community, the residents were outraged! Habitat is doing what the 235 program was doing; basing the house payment on your income. We need more programs such as these, this was a good program.

Apr 05, 2009 02:52 AM #8

I remeber working 8- hours a week to pay for my house and pay me taxes. My neighbors that had FHA 236 loans were partying all night. I got about 2 to 3 hours of sleep a night. I helped pay for their houses.  I will NEVER forget this. Thanks.

Apr 05, 2009 08:43 AM #9

When I got divorced the 235 mortgage we had allowed my children to stay in the same home and in a good school district for about the same cost as moving to a small apartment.  I was grateful for that but nervously watched as my subsidy repayment amount grew larger.  My 235 monthly payment covered the principle and a portion of the interest amount, with the subsidy covering the balance of the interest due. 80's interest rates were high and I could not qualify for refinancing at that time. Instead, I squeezed out every dollar I could to make home improvements; adding a garage, siding, gutters, new windows, new roof, a/c - not partying.  My understanding was that value increasing home improvements would help decrease the subsidy repayment amount due, when I could refinance.

When I was able to qualify for a new mortgage, I couldn't get much information from HUD.  Those I spoke with -- I mean those who would even return my calls - cited unfamiliarity with the older 235 program (I understand changes in the 235 loan program were made after we secured ours in 1981/82) and no one would consider researching repayment information unless I actually secured a financing commitment - tough to get when you don't know the amount you'll need! 

I finally found a mortgage company to help me untangle the mess.  With the government repayment amount required at several thousand dollars more than the original cost of the home, and  with the small principle amount still owing, I ended up with a new mortgage principle of nearly two and a half times the original price of the house -- after making payments for 12 years.  All the improvements I scrimped and saved for had absolutely no affect on what I had to repay the government for the subsidy interest paid.

A significantly lower interest rate makes my current house payment a little more than my previous 235 payment but I have little hope of ever paying off my mortgage.

Based on my experience with "helpful" government loan programs, I say "steer clear"!

May 30, 2009 01:13 PM #10
Brian Rice

The FHA 235 Program was a disaster and was being used in the 60 and 70's primarily as a social ree-ngineering tool to let low income people buy where middle income families were living.  The end result was that middle income communities suddenly became a low iincome community with all the crime that came with it.  Hard working middle class folks were now living next door to people who were on welfare, paying in some cases 1/3 the mortgage they were paying.  The FHA 235 program came very close to being bankrupt because the high rate of foreclosures, even after these people were given all these breaks they were not repaying thier debts.  Small wonder.

Bringing back the old FH 235 program is like asking to bring back the lier loan program of the last ten years that caused this current recession we're now in.  Owning a home is a privilege not a right.

Respectfully yours


Feb 05, 2010 02:21 AM #11
carla patrick

my decesed husband purchased properrty in 1999 and when he closed on the property it was never disclosed that the 235 program was in the previous i have a buyer for the property and find out with the payoff to the bank and the payoff on the 235 program i didnt make enough on the sell of my house to pay off the bank and hud,if anybody can help me please let me know.thanks 

Sep 13, 2010 07:38 AM #12

I was in the real estate business and then working the the local Assessor's office during and after the FHA 235 debacle.  The house being built to meet the limits set on price were junk and in some areas created instant slums.  The default rate was sky high and HUD ended up with a monster inventory of those things. For a few people it provided a short time in cheap housing but the overall program was a disaster.

Jun 23, 2011 07:39 AM #13


Feb 10, 2017 06:05 PM #14

We were one of the kind of families I think the original program was designed to help. In 1970 my husband and I were in our early 20's with 2 children under 3 years old. We only lived on my husband's income of under $500 a month. We qualified and moved into a new 1000 sq. ft. house with 3 bedrooms and one and a half bathrooms. It also had an attached 2 car garage which made a nice place for our 2 sons to ride their trikes on cold and rainy days! We were very thankful for this house and help! We also had a 3rd son later. As my husband's income increased so did our house payments until we were no longer considered on the 235 program anymore. We were divorced in 1989 and I got the house where I still live. I was able to pay the 30 yr. morgage off 3 yrs. early in 1997. I got a free and clear deed and probably will live here the rest of my life if I don't have to go into a nursing home. My 3rd son is single so lives in the house with me at this time. My whole point of this is that I am one of the ones it really helped and we really appreciated it! Two other homes across the street from me were also 235's and 2 families with young children moved into them the same year. They kept their houses nice until they eventually sold them and moved. I live in Texas, by the way.

Mar 29, 2018 09:07 PM #15
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