One-stop shopping for a mortgage? It's more like 30 now

To those who have them, they are like rare art treasures purchased when critics disdained them as common. Their owners often brag about their good fortune, telling everyone about their bargain.

These treasures are fixed-rate home mortgages, bought when interest rates were in more comfortable single digits. While adjustable mortgages are getting all the attention lately, the old-fashioned fixed variety is still dominant. But with interest rates of 16 to 18 percent, they have become so costly that only the more affluent -- or daring -- can afford them.

For those who cannot obtain or don't want the fixed-rate mortgage, buying a home means finding their way through a quickly growing morass of mortgage plans, playing under such names as "creative financing," "adjustable mortgages," and "variable-rate mortgages."

"Everybody's coming out with 30 different programs," says Alan Crittenden, exaggerating a bit. In the Washington, D.C., area, he says, a prospective home-buyer can select from as many as 40 financing arrangements if he or she has called all the banks, savings-and-loans, and mortgage companies operating there.

"A person has to make two decisions when they buy a house today," he pointed out. "First, they have to decide which house to buy. Then they have to decide on a mortgage to pay for it."

Mr. Crittenden, who edits and publishes a newsletter on real estate financing , recently produced a 45-page booklet to help people avoid the wrong mortgage for their needs and income and to know what questions to ask a lender.

Titled "How to Adjust to Adjustable Home Mortgages," the book notes that there used to be only a few standard questions a borrower had to ask, including: How much money can I borrow? What is the interest rate? What will my monthly payment be?

Today, borrowers must ask questions like: Is the mortgage a fixed rate or adjustable rate? How often will the rate move? Is there a maximum limit on each rate change? How much can the rate change over the term of the loan? What index will be used to calculate rate changes?

This last question is important, he notes, because lenders can peg rate adjustments to changes in any of a number of indexes, including six-month Treasury bills, three-year Treasury obligations, or existing home loan rates as surveyed by the Federal Home Loan Bank Board. It means rate changes can come as often as every six months or as infrequently as every five years.

To get the best deal, Crittenden suggests that homebuyers call at least 30 lenders, or as many as possible in rural areas, a far cry from days when people called one lender, or at most, three.

His $4 booklet is available for $5 (includes postage and handling) from Crittenden Publishing Inc., PO Box 128, Nevada City, Calif. 95959.

Some 35 to 40 percent of the home mortgages being written today are adjustable or variable, says James Kendall, a spokesman for the US League of Savings Associations. "And that's quite a lot, considering the regulations have only been in effect a few months."

Whether a person selects a fixed or adjustable mortgage "depends on which way you think interest rates are going to go," Mr. Kendall says. "if you think rates are going to go up, you ought to have a fixed rate." The consensus, however, seems to be that rates are going to be slowly heading down, he notes.

Kendall has also produced a book to guide people through the mortgage maze, titled "How to Get the Money to Buy Your New Home," and available in bookstores for $11.95.

While the number of adjustable and variable-rate mortagages is growing, fixed-rate mortgages will continue to be around for some time, lenders say.

"We just reentered the [mortgage] market last week," said Greg Rowan, assistant manager in the loan office at the Charlestown Savings Bank in Boston. "And we're only writing fixed-rate mortgages."

Suffering from deposit losses, thrift institutions like Charlestown Savings have been able to stay with or return to mortgage lending only through participation in the secondary mortgage market. This is a system by which the banks gather recently written mortgages and sell them in a package to an outside investor such as a bank, an insurance company, or one of the US government corporations that purchase mortgages. One of these government corporations is the Federal National Mortgage Association, commonly called "Fannie Mae."

After buying fixed-rate mortgages exclusively, that agency started also buying packages of adjustable mortgages on July 27.

With current high mortgage rates, Crittenden figures the housing market will stay sluggish for the next few months. But by early next year, he believes, rates will be down to about 12 1/2 percent, a level where "houses will sell like hotcakes."

How to figure your monthly payments Interest rate Amount per $1,000 loan 8 percent $7.34 8 1/2 7.69 9 8.05 9 1/2 8.41 10 8.78 10 1/2 9.15 11 9.53 11 1/2 9.91 12 10.29 12 1/2 10.68 13 11.07 13 1/2 11.46 14 11.85 14 1/2 12.25 15 12.65 15 1/2 13.05 16 13.45 16 1/2 13.85 17 14.26 17 1/2 14.60 18 15.07 18 1/2 15.48 Find your interest rate in the column on the left. The dollar figure in the right hand column in the amount to be paid every month for each $1,000. If your loan were $50,000 at 17 percent, you would multiply $14.26 times 50, for a monthly payment of $713. Source: Alan Crittenden.m