Summer's mortgage rates fall to new lows -- again

House sitting on top of money

Mortgage rates this summer continue to sparkle. With the average home loan selling for about 3.75%, you’ll be getting a great deal if you apply today.

This time last year, average 30-year, fixed-rate home loans cost about a percentage point more.

This time next year, we probably won’t be able to make the same claim.

In other words, don’t hold out for a 2.75% rate on a 30-year mortgage. It's probably not going to happen (though we wouldn’t mind being wrong about that prediction).

Our weekly chart of average mortgage rates shows what lenders are charging for a typical loan in 25 big cities.

Use our chart to get an idea of how much you should be paying for a home loan.

Then search our extensive database for the best rates from hundreds of lenders.

In several major metropolitan areas, highly qualified borrowers will find 30-year, fixed rate mortgages for as little as 3.5% with no points and less than $2,000 in lender fees.

Whether you’re purchasing a home or refinancing, our mortgage calculator will show you what your monthly principal and interest payments would be on any fixed-rate loan.

To get the cheapest loan, you need to know how and when to lock your rate.

Interest rates will fluctuate up and down between the time your loan is approved and the time it closes. Locking your rate means establishing the precise cost of your loan regardless of how the market moves.

Your locked rate must be equal to or lower than what your lender’s underwriter says you can afford, and you must commit to that rate a few days before closing.

You can lock your rate as early as when you apply for the loan.

With today’s low rates, locking early can be a good idea, says Ray Eickhoff, regional vice president of Fairway Independent Mortgage in Mill Creek, Wash. But the choice of when to lock is up to you.

"I recommend clients lock as soon as they can, because they always have options if rates go down but are stuck if rates go up," says broker Todd Huettner of Huettner Capital in Denver, Colo.

If rates go up too much, the home you want to buy could become unaffordable.

"As soon as you have a purchase contract or as soon as you hit your target rate on a refinance, lock your loan. Even if you think rates will go down tomorrow or next week, lock your loan right away," Huettner says.

If you don’t want to lock your rate right away, make sure you lock early enough to close on time.

"A loan must be locked before the closing documents can be drawn, and it is wise to lock before going into underwriting for the final approval so as not to cause a delay," Eickhoff says.

Having to go back to the underwriter to get a different rate approved can cause a two- to five-day delay in closing in today’s market, Eickhoff says.

Closing late might not be a big deal if you’re refinancing, but it can be critical when you’re purchasing because your purchase and sale agreement will have a defined closing date.

When you lock your loan, you’ll need to choose a lock term. Loan lock periods typically range from 30 to 90 days. For a longer lock period, you may have to pay points.

Your lock term should be based on how long it will take to close your loan.

If most loans take 45 days to close, a 30-day rate lock won’t do you any good. And locking when you apply might not help if you don’t already have a property under contract.

If your lock expires and you haven’t closed yet, you may be able to extend your lock period.

But don’t commit to anything until you have all the details.

"Before you lock, know the following: Can you extend? When? How many times? What are the costs?" Huettner says. "You probably won't need an extension, but you must know the costs in case you do. Lock extension fees and terms vary greatly, and some lenders do not allow them."

Also ask about any fees associated with locking your rate.

If interest rates drop after you’ve locked your rate, you might be out of luck because some lenders don’t allow rate relocks. But other lenders will let you take advantage of the lower rate.

"Most lenders require that your rate improve by 0.250% or more and charge a large fee, but some only require a 0.125% improvement and smaller fee. With current market volatility, you can often lower your rate by choosing the right lender and knowing the rules in advance," Huettner says.

However, you’ll have to monitor rates yourself. Lenders usually won’t do it for you.

If interest rates decrease significantly and you can’t negotiate your locked rate, you could always switch lenders. But doing so will cost you time. Timing may not matter in a refinance but could cause major problems in a purchase.

A good loan officer or broker will automatically discuss the fine points of rate locking with you, says Huettner.

“If they don't, it will cost you money, and you need to look for another lender,” he says.

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