4% mortgages are back as rates remain near record lows

House on rate chart

The financial crisis in Europe has had the unexpected effect of pushing mortgage rates in the United States to record lows for the second week in a row.

The average rate for a 30-year, fixed-rate mortgage -- the most popular type of loan -- was 4.95% in our latest weekly survey of major lenders taken June 2.

That's not much higher than the 4.92% reached in last week -- the lowest average since Interest.com and its print predecessors began the survey in 1985.

Search our extensive database of mortgage rates from scores of lenders in every market.

In most cities, you'll find banks and mortgage companies offering 30-year, fixed-rate loans for 4.75% with no points and fees of $2,000 or less.

That means your principal and interest payments will be just $522 a month for every $100,000 you borrow. (Our mortgage calculator can show you the payment for any loan, any amount, rate and term.)

By any historical standard, a 30-year, fixed-rate loan that costs less than 6.5% is a good deal. So what does that make today's rates? A once-in-a-lifetime good deal.

Opt for a 15-year loan -- a popular alternative for refinancing -- and you'll be able to cut that to 4.25% with payments of $752 a month for every $100,000 you borrow.

The average cost of a 15-year mortgage was 4.36% in our most recent survey, just two-hundredths of a point more than the record low set last week.

Qualify for one of these loans, and you'll never have to refinance or worry about your mortgage again.

They're safe, totally predictable loans that carry none of the risks associated with interest-only or adjustable-rate mortgages. You'll never have to fret about interest rates going up, principal payments kicking in or any other nasty surprises that could drive up your housing costs a few years down the road.

Rates were expected to rise after the Federal Reserve ended its campaign to flood the mortgage market with money.

But worries that several European nations might default on their loans have created a new financial crisis and sent investors fleeing for the safety of Treasury bills or other debt guaranteed by the U.S. government.

That includes mortgages, because 96% of all new home loans are now backed in some way by an agency of the federal government.

That surge in demand has actually pushed interest rates down since the Fed bought the last of the $1.25 trillion worth of home loans it now holds in late March.

You've probably heard that banks and mortgage companies have tightened their requirements for getting a mortgage after unwisely lowering their standards during the housing boom.

The return to reasonable underwriting standards is a good thing and shouldn't stop most borrowers from getting the loans they want.

You'll have the best chance of getting a low rate with low fees if you:

Have an average credit score. That's a FICO score of 720 to 730.

If you have below-average credit, you should probably pursue an FHA or VA loan.

Borrowers with lower credit scores can increase the odds of having their application approved by getting the government to guarantee the loan's repayment.

Earn enough money to repay the loan.

Be able to fully document your income, assets and debts.

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