January 16, 2012 best mortgage 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 *** EXPECT IMMINENT RATE DROP ***

Today is a slow day for American traders because of the Martin Luther King, Jr., holiday, which closed U.S. markets and most lenders. However, Europe does not celebrate MLK day, and things are being shaken up. Overseas markets are feeling the effects of last week's downgrading of several countries by S&P: Stocks are taking a beating, and the bears are out in force.

In after-hours trading, 10-year Treasurys have dropped almost 0.10 percentage points. Mortgage rates should follow suit when the gates open on Tuesday. I'd expect lenders to price aggressively. They would have been cautious on Friday going into a long weekend. Unless something big happens this afternoon or evening, expect mortgages to cost a bit less on Tuesday.

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.