REAL ANSWERS

Q: With rates rising, is there any way to get a low-interest loan?

A: Yes, if you shop around. For example, price discounts and interest rate buydowns are common incentives offered by new home builders trying to overcome slow sales.

A buydown is a financing technique used to reduce the monthly payment for the borrower during the initial years of the loan. Under some buydown plans, a residential developer, builder or the seller will make subsidy payments (in the form of points) to the lender that "buy down," or lower, the effective interest rate paid by the buyer, thus reducing monthly payments for a set period of time, according to John W. Reilly, author of "The Ultimate Language of Real Estate," (Dearborn Financial Publishing Inc., Chicago, 1993).

The California Housing Finance Agency, Sacramento, currently offers first-time home buyers fixed-rate 30-year loans with an interest rate of 7.75%, said Richard La Vergne, deputy director for the agency. The current rate for a conventional 30-year mortgage is 8.53%, according to Freddie Mac.

"To qualify, a purchaser must be a first-time home buyer and meet income limits based on the median income level of his or her county. Many...who otherwise would not qualify for a loan, by using our underwriting and our interest rates, would qualify," La Vergne said.

In Los Angeles County, the income for a three-person family is limited to $51,300. Borrowers can purchase a newly constructed house priced up to $226,400 or resale home for $165,800, he said. For more information on how to apply, call (800) 789-CHFA.

Resource: "The Common Sense Mortgage, How to Cut the Cost of Home Ownership by $100,000 or More," Peter G. Miller, HarperCollins Publishers Inc., New York, N.Y., 1994.

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