January 11, 2012 best mortgage interest rates and lock recommendation

Here is today's look at best mortgage rates provided by HSH.com, Mortgage News Daily and other sources. These do not include loan-level risk-based price adjustments imposed by Fannie Mae and Freddie Mac. Note that average mortgage rates are typically higher than the best mortgage rates, because average rates include surcharges for risks associated with property types, down payments and borrower credit scores. To be eligible for the best rates, borrowers need excellent credit with a score of 740 or better, a sizable down payment or equity amount of 20 to 25 percent and stable, adequate, verifiable income. In addition, the property must be located in a healthy, not declining market and must be conventionally built. Condominiums, manufactured homes and farms do not apply.

LOCK ALERT *** RATES NEARLY UNCHANGED, LENDER FEES UP ***

Tosay's Treasury auction was well-received, and that caused bond prices to increase and yields (interest rates) to decline. However, that trend did not materialize in the mortgage-backed securities (MBS) market. Many lenders are keeping fees higher than they need to; when demand for mortgages exceeds a lender's capacity to provide them, it responds by increasing fees to temper demand. That may be happening across the board right now.

If you're buying a home with a mortgage now, shop before you lock to make sure your rate offer is fair. If refinancing, don't pull the trigger unless rates and costs fall within your target range.

If closing in the next 15 DAYS, I would LOCK my rate. Otherwise, I'd FLOAT my rate. This is only an opinion: What I would do if I were closing a mortgage at this time. Your decision may depend on other factors, such as the strength of your loan approval and your tolerance for risk.