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Home ownership dream still alive in Americans' hearts

Are Americans wavering in their traditional resolve to own a home?

The answer, according to a recent study done by the Federal National Mortgage Association (FNMA), is a resounding ''no.'' High mortgage rates and hefty price tags on homes notwithstanding, Americans continue to make plans to invest in a place they can call their own.

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But many - at all income levels - are concerned about affordability. Ninety-one percent of respondents, both homeowners and nonhomeowners among them, believe that two paychecks are necessary to meet monthly mortgage payments. Still, 71 percent of those who foresee a move at some point plan to own, rather than rent, their home.

Despite the slow real estate market, and the increasing doubts about the return on a home investment, current homeowners cited as their major incentives behind ownership the investment value of the home and the desire to put down roots in a community.

Among all consumers, there is a greater awareness that more careful planning and flexibility in financing a home is needed, although only about one-third of the respondents were familiar with five new kinds of mortgages that were cited in the study.

According to Beth Van Houten of the FNMA, there is a strong need for better consumer awareness and education in new home-financing techniques used by the financial community. Most consumers rely on newspapers and magazines to keep them informed about the housing market and housing finance, but they seek out this information only when they start to look for a home.

''Most people have only a vague awareness of their options,'' says Ms. Van Houten. ''They will use the alternatives if those address affordability and some degree of stability in monthly payments.''

Ms. Van Houten points out that, at the time of the study, mortgage rates were hovering around 16 to 17 percent and expectations were that they would stay high or climb even higher. Given this, she feels, acceptance of new financing plans was ''surprisingly strong.'' If the poll were being conducted today in a lower interest-rate environment, she adds, acceptance would probably be higher.

The most popular mortgage option, if a long-term, fixed-rate mortgage was unobtainable, was the graduated payment mortgage (GPM). Twenty-nine percent of the respondents opted for this plan, under which payments start at a low level and increase gradually during the first few years of the mortgage. When payments stabilize, they are slightly higher than for a comparable fixed-rate mortgage.

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The FNMA study found that many renters who rented again when they moved, deferring a home purchase, did so because of affordability. The GPM gives such nonowners a foot in the door in qualifying for a mortgage.

Nevertheless, fixed-rate mortgages remain the most popular choice among home buyers. Bill Mullin, a loan officer with Provident Institution for Savings in Boston, says that currently almost all of his bank's mortgages are fixed-rate.

The Provident does offer such options as blended refinancing, where an existing mortgage is blended with new funds at a market rate, and adjustable-rate mortgages (ARM), where the interest rate and monthly payments change at regular intervals. Mr. Mullin points out that, for those who spend the maximum desirable percentage of their gross income (28 percent) or more on monthly payments, an ARM is a risk unless they are convinced interest rates will drop.

The Provident also provides Massachusetts Housing Finance Agency plans, which offer a rate of 13.7 percent and are available to first-time buyers in a median-income bracket. A family of four, for example, can have an income no higher than $28,000. A maximum of $58,200 can be spent on a newly constructed home purchased under the plan.

The FNMA poll found that ARMs, while not so popular in comparison with other options, grew more desirable when the amount by which the rate could increase was capped.

Mullin feels that a majority of people know only about fixed-rate mortgages. However, he says, ''people are becoming more and more sophisticated. And we try to explain all the options to them.''

The FNMA will now take the results of the poll, according to Ms. Van Houten, and come up with new options for home buyers. ''We're analyzing the study, talking to the lending community. We expect to be revising some of the existing plans and coming up with new ones, while still incorporating the needs both of lenders and borrowers.''

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