Where should a home buyer go to get the best deal on a loan to buy a house?
As is the case with most things, the answer depends on what you're looking for and what kinds of trade-offs you are willing to make. That's the conclusion likely to be drawn from the monthly conventional mortgage loan data published by the Federal Home Loan Bank Board, which regulates federally chartered savings and loan associations and mutual savings banks.
Savings and loans provide the bulk of the money for home buying in the United States, but other major sources of home loans are mortgage companies, commercial banks and mutual savings banks.
If the potential home buyer is thinking only in terms of the reffective rate of interest on his loan, a mutual savings bank is usually the best source. But mutual savings banks are not found in most parts of the U.S. They operate mainly in the northeast and a few other places. The average effective rate for a loan from a mutual savings bank in February of this year, for instance, was 8.76 percent on a new home as compared to 9.19 percent for a savings and loan association.
Mortgage companies had the highest effective rate of interest on loans made in February - 9.39 percent on new homes.
("Effective" interest rate includes the interest rate on the mortgage as well as discount points and other charges spread over a 10-year period.)
On the other hand, if the buyer is concerned about the size of the down payment, a mortgage company is clearly the best place to go. The average down payment on a loan made by a mortgage company in February was less than 17 percent, as compared to over 30 percent for mutual savings banks and more than 23 percent for savings and loan asociations.
According to the bank board figures, almost two out of every five of the loans made by mortgage companies in February required 10 percent down or less. Savings and loans and mutual savings banks made far fewer low-down-payment loans.
Interest rates and down payments are generally lower for new homes than for resales of existing homes.
The bank board's figures also show that interest rates have continued to rise steadily for the past year. The figures also show significant regional variations in interest rates, with rates generally higher in the West than in the East.
Effective interest rates for resales of existing homes for February of 1978 and February 1977, and the year-to-year change, in selected metropolitan areas, were as follows: