January 13, 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 *** EUROPE, BAD; MORTGAGE RATES, GOOD ***

Today, S&P lowered the boom on nine European nations' credit ratings, prompting a stock selloff, a run on bonds, and a drop in mortgage rates to new record lows. Italy, Spain, Portugal, Cyprus, France (the big deal), Malta, Slovakia and Slovenia all got downgrades, making it more difficult and more expensive for these countries to borrow money.

This was not unexpected; investors have been expecting something like this for weeks. More alarming, though, was the statement issued with the downgrades. S&P warned that most eurozone governments could face additional downgrades, due to a "more adverse economic and financial environment."

This news makes the U.S. a safer market, relatively speaking, and U.S. bonds an economic bomb shelter -- at least for now. If you can lock long-term (60-plus days) for 0.25 percent or less, I'd say do it. Otherwise, grab 30 days, which you should be able to get for free or at a cost of 0.125 percent, max.

If closing in the next 30 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.