The "Let your fingers do the walking" jingle of Ma Bell rarely has been more meaningful for home buyers than in today's squeezed mortgage market.
Consumers can save 1/2 to 3/4 percent on their mortgages - and get other favorable financing terms worth thousands of dollars over the life of an average loan - by taking time to shop for money diligently.
The spread between high-rate lenders and low-rate lenders in a comeptitive market like metropolitan Washington is wider than many buyers and brokers recognize.
For example, the best quotation from one Bethesda savings and loan association, Metropolitan Federal, is now 11 1/2 percent for loans up to $100,000, on well-located homes in Montgomery County with 25 percent down payments.
Yet the largest S&L in the area, Perpetual Federal, will make loans of up to $200,000 on similar suburban Maryland properties for 10 7/8 percent with 20 percent down payments. Colonial Mortgage Corp. of D.C. offers 10 7/8 percent and charges one discount point for the seller and one for the buyer. And Suburban Costal Corp. of Rockville offers similar loans for properties no older than 25 years at 10 5/8 percent with no points. (A point is equal to 1 percent of the mortgage amount, and is collected in cash by the lender at or before settlement.)
Quotations on conventional loans for resale houses in the area now run anywhere from 12 percent - at the Costal Mrtgage Corp. in Baltimore, which specializes in financing for properties or buyers rejected by other sources - down to the effective rates of 10 1/2 to 10 3/4 percent.
The quotes and spreads change almost daily, however, as lenders deplete their funds or come up with new capital. Occasionally established lenders from outside the immediate area will make a sudden splash by arriving with large commitments of cut-rate mortgage money, 1/4 percent or more below the going rate.
Loyola Federal Savings and Loan Association of Baltimore, for instance, periodically receives deposits of funds from investors that are more than needed for its market. Loyola then phones the news to real estate brokers in Montgomery and Prince George's counties, The funds are usually sopped up in a matter of days. Loyola isn't in the suburban market at the moment - in fact, it's barely in the Baltimore market because of deposit drains - but it could turn its attention here again in the coming weeks.
Downtown Washington lenders also get sudden infusions of funds from large investors that enable them to offer loans at rates below the prevailing average.
Community Federal Savings and Loan Association, for example has been offering $100,000 loans on District properties for 10 5/8 percent with one point each for the seller and buyer. Despite its small size, Community Federal hasd thus been able to bid lower than Perpetual and other big District S&Ls, whose quotes for mortgage loans in the city have been at an effective rate of 11 percent the maximum permitted under local usury law. (B.F. Saul Mortgage Co. of Bethesda, incidently, also has maintained a relatively competitive rate in the city - 10 1/2 percent plus one point each for the seller and buyer.)
Buyers can plug into the fast-moving interest rate game by spending 30 minutes wit the Yellow Pages when they need a mortgage commitment, calling five or six lenders from each of these categories: S&Ls, mortgage companies and federal credit unions. Commercial banks are another possible source, but are not likely to be competitive for any but their blue-chip depositors.
There are about 40 S&Ls active (or periodically active) in the metropolitan market, along with 50 mortgage brokers and dozens of federally chartered credit unions (not all of whom are making home loans).
Ask for the rate schedule and terms for your location (quotes differ among the three jurisdictions), and ask for annaul percentage rates (effective rates) when points are quoted.
Also be acute to the accompanying terms that are quoted with the basic rates. For example, Perpetual insists that its borrowers use an automatic payment plan that deducts money from a savings account. Borrowers who don't go along with this - those who want to pay by check in the traditional manner - may get socked with an extra 1/8 percent on their mortgage rate.
Kenneth R. Harney is executive editor of the Housing and Development Reporter, published by BNA, Inc., and author of Beating Inflation With Real Estate, Published by Random House.