For those interested in buying a home or refinancing, the time to take the plunge is now. Home mortgage interest rates are the lowest they’ve been in 30 years, sliding below 6.5 percent in November before climbing back into the 7 percent range in December. And traditionally interest rates dip in January and February.

As a result, mortgage providers are busier than ever. Despite slowdowns in other industries hit hard by the recession, the mortgage business is booming. “It’s a very hot time right now,” says Arlette Goodley, a real estate loan supervisor with California Coast Credit Union. “Rates are as low as they’ve been in forever and we’re working to keep up the pace.”

The Mortgage Bankers Association of America reports that the residential mortgage sector produced a record $1.44 trillion in home mortgages through the first nine months of 2001, and the industry continues to originate $160.88 billion a month in new loans. At that rate, lenders could wind up making as much as $1.93 trillion in loans this year, well over the record $1.55 trillion of 1998.

The rates are not the only factor contributing to this mortgage boom. Streamlined systems for processing loans, ultrafast credit checks and even online applications have significantly cut costs for lenders. Customers can now refinance after as little as a 0.5 percent drop in rates.

“The old adage of waiting for a 1 percent or 2 percent drop has gone by the wayside,” reports Bob Fouts, vice president and manager of the real estate lending division for Southwest Community Bank. “Thirty years ago, that rule made sense, but not now.”

Add to that an enticing practice born of fierce refi competition. Many lenders now offer “no cost” loans, where the fees and closing costs are rolled into the loan itself. Although this means borrowers must pay the fees off over 30 years, they also become part of the tax deductible interest.

“People don’t want to write a check to refinance,” says Gary Ahlgren, senior vice president of lending at North Island Financial Credit Union. “They just want to lower their loan payment.”

It is no wonder many are eager to buy a home or finance their current one. But while the home mortgage process has become simpler in some respects, it still remains a complex and daunting financial gauntlet. Most borrowers are not financial wizards who know the industry’s nuances. Making decisions can be tough with today’s consumers able to choose from wide range of mortgage products, such as long- or short-term loans, loans with fixed or variable rates, loans with balloon payments and a fixed that converts to a variable. Points, underwriting and other fees charged by the lender also add to the total cost of the loan and some mortgage providers have been known to pad a loan with additional costs, known as junk or garbage fees, to increase their profits.

“The key is finding someone who is honest and has integrity,” advises Gary Lewis Evans, president and CEO of the San Diego-based Bank of the Internet. “You need someone you can really trust.”

Where The Mortgage Providers Roam

• Banks: Once upon a time, most borrowers turned to their neighborhood bank thrift and loan for a home mortgage. Not only is a bank a known institution, it has regulations regarding disclosures. Banks often specialize in customer service. “This is such a major transaction, you need to be able to talk to someone,” says Fouts.
  
  The downside is an individual bank may not have as wide a range of mortgage products as other providers or as competitive rates.
  
  
• Credit Unions: Not all credit unions offer home loans and those that do are usually new to the game. Like banks, they are a known institution with disclosure regulations and provide one-on-one service. “Because we’re member-owned, we’re not-for-profit,” explains Ahlgren. “So we try to keep our fees as cheap as we can.”
  
  
• Mortgage Brokers: Mortgage brokers are licensed loan professionals who can provide an extensive shopping service for borrowers. “The reason mortgage brokers have been so successful is that we’re small shops, so we can weather the expansion and contraction of the market and offer lower prices,” says Mark Nokes, a senior loan consultant with Southland Equities Mortgage Corp. “We have a deep range and can offer more niche products.”
  
  Still, Nokes recommends that borrowers look for brokers who belong to a chapter of the Mortgage Brokers Association, which enforces certain ethical standards among its members.
  
  
• Internet Providers: Internet loan companies tempt borrowers with their convenience. “We can do everything online except signing the loan documents,” says Evans. “So an applicant can be in their bathrobe at 2 a.m. and they don’t have to have an appointment or have someone come out to their home. That kind of convenience can’t be beat.”
  
  Many Internet mortgage providers have one other competitive edge — low prices. “Because we don’t have to man a physical building, we can pass the savings on to the customer,” says Evans. Still, many customers are uncomfortable with providing sensitive financial information over the Internet. “Not everyone has a computer at home or is comfortable with the process,” admits Evans. “So we’re not all the way there, but it’s growing tremendously.”
  
  And the Internet is no longer the exclusive domain of Internet loan providers. Many banks, credit unions and brokers also are beginning to process loans online as a value-added service. “Our credit union is only open five days a week, but our customers want 24/7 access,” says Goodley of California Coast Credit Union.

Making A Match

Before selecting one of the above providers, borrowers must decide what they want — extensive service, low prices, a well-known reputation, immediate access or a wide loan product line. Each borrower has different needs and goals, and there are providers who meet each customer’s requirements. For instance, Nokes remembers a client who came to him for a home mortgage loan instead of applying over the Internet. What made this surprising is that the applicant had recently retired from Microsoft.

“He didn’t feel confident borrowing that much money if he couldn’t look the lender in the eye,” says Nokes. “For many people, it’s like getting a divorce online. It’s too personal, too complex.”

Like any business transaction, start by getting referrals. “Do your homework,” advises Fouts. “Talk to friends, neighbors, your realtor.” Pick up the phone and interview these providers. Ask questions, such as how long they’ve been in business, their experience, their goals for customers, their loan product line and if they can lock in and guarantee an interest rate. To be able to ask these questions, it’s a good idea to be educated on mortgages in general. Many of Nokes clients have already used the Internet or various publications to educate themselves on the home loan process.

But the most important element in a borrower-provider relationship is rapport. “You have to feel comfortable with this person,” says Ahlgren. “You’ll be working with them two to three weeks in what is probably the biggest transaction of your life.”

That comfortable relationship can make all the difference in making the home mortgage or refinancing process one that is successful for both parties. “It’s a ride through this process,” adds Nokes. “You can get there in a taxi or in a limo. A limo is the provider who exceeds expectations.”