New housing market requires a map for the maze of mortgages

Welcome back to the housing market. While you and many others were away, kept out by near-20 percent mortgage rates, the housing finance business has invented or expanded numerous devices to help people get into a home despite high rates, to protect lenders from the burden of long-term below-market returns on their mortgages, or both.

So even with lower rates, home buyers have a lot more to learn before they go through the solemn ceremony of ''passing papers,'' where new owners take legal posession of the house and mortgage payments. Fortunately, there is plenty of information available to guide you through the mortgage morass. Even more fortunate, some of it is free.

To help you understand balloons, buydowns, ARMs, RAMs, and wraparounds, the Federal Trade Commission (FTC) offers ''The Mortgage Money Guide,'' a booklet that uses definitions, examples, and payment tables to help explain various mortgage terms and what they mean in monthly payments.

A copy of the free guide can be obtained from the FTC, Sixth Street and Pennsylvania Avenue, NW, Washington, D.C. 20580.

Another useful publication, ''The Complete Book of Home Buying'' (New York, Bantam Books, $3.95), has Michael Sumichrast, the often-quoted chief economist of the National Association of Home Builders, as coauthor. The book gives useful background on why home prices took off, how lenders developed the new mortgages to help buyers and protect themselves, and what the future is likely to hold for home buyers.

First published in 1980, the book has been revised and updated at least twice since then. It contains tips on buying, selling, investing in real estate, and home improvements that can make a difference when selling. While it does not spend a lot of time on all the new creative financing arrangements, the book should be valuable to anyone who wants to be as nearly well informed about home buying as the professionals they are dealing with.

For someone who wants to get ready for home buying very quickly, there's ''How to Adjust to Adjustable Home Mortgages,'' by Alan Crittenden, who writes a newsletter on real estate financing. The 45-page booklet is available for $4 from Crittenden Publishing Inc., PO Box 128, Nevada City, Calif. 95959.

Mr. Crittenden's book deals with the six most often asked questions and the kinds of answers home buyers should expect. These standard questions include: What is the interest rate? What are the loan fees and costs? and, Is the loan assumable or due on sale? These questions, Crittenden explains, are for people who have a fixed-rate mortgage.

For those who are using some kind of adjustable or ''creative'' financing, he offers six new questions that have become important today, including: How often will the rate move? Is there a limit on each rate change? How much can the rate change over the term of the loan? And, What index will be used?

Moving out of the no-cost and low-cost publications is a recently published book, ''Everything You Need to Know About Creative Home Financing'' (New York, Simon & Schuster, $15.50), by Frank Coffee. This book goes into extensive detail about every type of mortgage, including fixed-rate financing, the wide variety of flexible mortgages, and the opportunities and pitfalls of seller financing. It also contains a useful glossary of the home financing terms your real estate agent or attorney might be tossing around.

These are just some of the books on home mortgages. Your local bookstore is bound to find several more useful books. Whether you read one of those mentioned here or a different book, the idea is the same: to learn as much about the mortgage maze before trying to find your way through it.

Reverse annuity mortgages

I recently heard a term mentioned on the radio - reverse annuity mortgages - but I missed the complete explanation of it. Would it be a good idea for someone who doesn't have much money, has no heirs, and would like to own a house? M. R.

The first thing you must have to qualify for a reverse annuity mortgage, or RAM, is the house. A RAM cannot help you buy a house. It is meant for people 65 years old and over who own their homes free and clear of any mortgage. People who qualify for a RAM are able to borrow up to 80 percent of the appraised value of their house. Instead of getting a lump sum from the lender, the homeowner receives equal monthly payments for a specified period, such as 10 to 20 years. At the end of the term or upon the death of the borrower, the RAM loan is repaid , usually from the proceeds of the house sale.

Like a real ram with its large horns, a RAM for homeowners should be approached with caution. While refinancing may be offered, there may not be enough equity in the house to provide enough money to live on. And interest rates, which come out of the monthly payments, may be much higher, further cutting into income from the house.

But for someone who has no heirs, needs the extra income, and may plan to move in a few years anyway - to a retirement home or community, for instance - a RAM may be a good way to provide income in the meantime.

If you would like a question considered for publication in this column, please send it to Moneywise, The Christian Science Monitor, One Norway Street, Boston, Mass. 02115. No personal replies can be given by mail or phone. References to investments are not an endorsement or recommendation by this newspaper.