Playing the mortgage game - Statistical Data Included

Black Enterprise, July, 2000 by Kelli D. Herd

Homeowners still in it despite higher rates

The Federal Reserve may be trying to cool down a torrid economy by raising short-term interest rates, but someone forgot to tell home buyers, as well as bankers pushing a host of mortgage loan products. Since last June, the Fed has hiked rates 125 basis points, or 1.25%--and will likely raise rates at least another 25 basis points on May 16--in an effort to head off inflation. Despite the Fed's actions, mortgage rates have gone up only fractionally since last year, although currently, they are at the highest level since June 1996 when the average 30-year fixed rate mortgage was 8.03%. They're expected to shoot even higher later this year, to 8.09%.

Historically, today's rates don't even compare to the double-digit levels last seen in the early 1980s, says Keith T. Gumbinger, vice president of HSH Associates, a provider of consumer loan information in Butler, New Jersey. The flip side of the coin: today's 8%-plus mortgage rates are substantially above 31-year low of 6.68%, last seen in October 1998, making some folks nervous.

But despite this rising-rate environment, the number of first-time homeowners has soared from 1996 to 1999, setting new records each year. That number leveled off at 40% in 1999.

Mortgage analysts say some realtors, in an effort to gain more customers, are encouraging first-time home buyers to look at other loan products aside from fixed-rate mortgages (see "The Most Home for Your Money," this issue).

One popular choice is the less expensive adjustable rate mortgage (ARM). Bankers are pitching ARMs to the single home buyer who may marry at a later date and wish to sell his or her home. In addition, hybrid ARMs, which initially offer a fixed rate, then later adjust to a variable rate, are now available in three-, five-, seven- or 10-year increments.

Home buying is also on the rise because of the opportunity to purchase a home with little or no money down, says Gumbinger. Twenty-five years ago, a 20% down payment was a common practice when buying a home. Nowadays, the average "real-world down payment" is between 3%-5%, says Walter Molony, a spokesman for the National Association of Realtors in Washington, D.C. In many instances, mortgage companies will finance closing costs, allowing many first-time buyers to walk into a brand new home having paid close to nothing.

So in spite of Alan Greenspan & Co. jacking up interest rates now and in the future, the mortgage market should remain robust.

The Best 30-Year Fixed-Rate Mortgages in the Top Metros

                                                           Down
City               Lender Name                Rate       Payment

New York           Brooklyn Federal           8%            5%
                    Savings Bank
Los Angeles        American Commerce          8             5
                    Mortgage
Chicago            Countrywide Home           8.375         5
                    Loans Inc.
Philadelphia       Fox Chase Federal          8.375         5
                    Savings Bank
Detroit            Dearborn Federal           8.125        10
                    Savings Bank
Washington, D.C.   Market Street              8             5
                    Mortgage Corp.
Dallas             Wells Fargo Home           8.375         5
                    Mortgage
San Francisco      California Bank & Trust    8.375        20
Houston            Summit Mortgage            8.125         5
Miami              Sun Trust Bank             8.5           5
Boston             Home Financing             8             3
                    Centers Inc.
Atlanta            Premier Lending            8.125         5
Minneapolis        Countrywide Home           8.5           5
                    Loans Inc.
St. Louis          Cornerstone Mortgage       8.625         5
                    Inc.
Baltimore          Baltimore County Savings   8.25          5
Phoenix            Hart West Financial Inc.   8.5           5
Seattle            First Horizon Home Loan    8.5           5
                    Corp.
Cleveland          The Leader Mortgage Co.    8.25         10
Denver             Westamerica Mortgage Co.   8.50          5
Portland           Mortgage Market Inc.       8.375         5

City               Lender Name                Points    Telephone

New York           Brooklyn Federal           2        718-855-8500
                    Savings Bank
Los Angeles        American Commerce          1.75     714-970-9700
                    Mortgage
Chicago            Countrywide Home           2        630-510-7753
                    Loans Inc.
Philadelphia       Fox Chase Federal          0        215-342-3700
                    Savings Bank
Detroit            Dearborn Federal           2        313-565-3100
                    Savings Bank
Washington, D.C.   Market Street              2        703-359-0100
                    Mortgage Corp.
Dallas             Wells Fargo Home           1        817-263-0023
                    Mortgage
San Francisco      California Bank & Trust    1        415-923-0800
Houston            Summit Mortgage            1        713-871-8371
Miami              Sun Trust Bank             1.125    305-592-0800
Boston             Home Financing             2        800-844-1992
                    Centers Inc.
Atlanta            Premier Lending            2        770-939-1060
Minneapolis        Countrywide Home           1        651-631-0046
                    Loans Inc.
St. Louis          Cornerstone Mortgage       0        314-965-9910
                    Inc.
Baltimore          Baltimore County Savings   0        410-256-5000
Phoenix            Hart West Financial Inc.   0        602-263-1212
Seattle            First Horizon Home Loan    1        425-670-9191
                    Corp.
Cleveland          The Leader Mortgage Co.    2        216-696-8000
Denver             Westamerica Mortgage Co.   1        303-694-3660
Portland           Mortgage Market Inc.       1        503-968-9257