Nearly a third of mortgage applicants who shop online chose an adjustable-rate mortgage between February and September of this year, according to the latest Bankrate consumer focus survey.

The survey showed that 31.9 percent of mortgage applicants received an ARM during the latest survey period, compared with 24.1 percent for the December 2003 to March 2004 survey period as well as the August to November 2003 survey period.

The latest survey involved 6,982 consumer respondents who were looking for mortgage lenders and agreed to answer questions while visiting the mortgage pages at Bankrate.com.

The latest survey also showed that first-time home buyers are 52 percent more likely than others to choose an ARM. They also are likely to be between the ages of 25 and 34, have no children and are more likely to approach institutions they are familiar with or that have been recommended.

Interest rate and closing costs were cited as the most important criteria in choosing a mortgage lender. First-time homebuyers value a personal reference, while previous experience with the institution is appealing among those who currently have $75,000 or more in home equity.

The survey also found that rate information is used by 88.2 percent of applicants to help create the “short list” of contenders.

“And it is a short list. Consumers select, on average, three institutions from which to get more information or to apply,” said Paul Gold, director of Mediamark Research Interactive, which executed the online survey.

Other survey results included:

  • Applicants applied to an average of 1.7 lenders – 56.7 percent applied to just one financial institution. Proportionately, more first-time home buyers – 54.6 percent vs. 47.9 percent – applied to two or more lenders.
  • Among those who applied to two or more lenders, veteran homebuyers are likely to apply to three institutions. Consumers submitting multiple applications are more likely to consider an ARM.
  • Local banks capture the largest share of loan applications. The first institution applied to among 41.4 percent of respondents is a smaller, more local bank.

“Lending institutions need to get short-listed by the consumer, and it’s clear the consumer is basing the loan decision on more than just the cost,” said Susan Weiss, a senior consultant on the mortgage survey. “You won’t get on the list without a competitive package, but you may not get an application even with one.”

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