Mortgage rates aren't as low as they've been all year, but after four consecutive weekly decreases they do offer a new opportunity to lock in mortgage costs.

"Rates are not as low as they were in March, but if anyone missed that cycle they could refinance now or jump in (as a home buyer) and take advantage," said Warren Myer, CEO of Myers Internet Services, a San Jose, CA-based publisher of the LoanApp.com and BestRate.com consumer mortgage websites.

The average fixed interest rate on 30-year conforming mortgages stood at 5.81 percent on Aug. 19, after four straight weekly declines.

The Aug. 19 rate isn't as low as the March 19 average of 5.38 percent -- this year's low point -- but it is much lower than the 6.24 percent average during the same period last year and this year's high of 6.34 percent, according to Freddie Mac's weekly Primary Mortgage Market Survey.

Fixed interest rates in the Southeast were even better at 5.73 percent. In the West the average was 5.76 percent. Regional market conditions account for the differences, experts say.

"After earthquakes lenders think California is not the best place to do business, but right now because loan sizes are larger (than much of the rest of the nation) you can get better prices. There's not a huge difference, but lenders also see the West as much more competitive. People shop harder," said Myer who also studies consumer borrowing habits nationwide.

In any event, given this year's ups and downs in the mortgage interest rate market, an interest rate lock is a good way to secure a mortgage interest rate today for a loan that might not close weeks or even months down the road when rates could trend up.

"In the next 12 months, anticipate rates, including the cost of housing to continue to increase," said Andrea Caldwell, with Century 21-Alpha in San Jose, CA.

"This is a small window of opportunity that, over the long haul, will probably be slammed shut," she added.

A rate lock is a lender's guarantee that your mortgage will come with a specific interest rate, set points, and other fixed costs. The lock is also good for a specific period -- if you fail to complete your home purchase or refinance before the clock runs out, and interest rates rise, you'll pay the higher rate.

If interest rates fall during the lock period you may not be able to take advantage of them without paying additional rate lock costs -- unless the rate lock contract allows you to cash in on the lower rate.

Rate lock policies and costs vary widely.

Some lenders automatically extend the lock only for a set period even if your loan doesn't close on time. Other lenders will automatically extend the lock until the loan closes, perhaps with one free extension. Still others will charge a small fee to extend the lock.

Locks should be long enough, initially, to allow for settlements, contingencies, and other loan processing events. The average rate lock is for 30 to 45 days.

"If you cannot find a property in a week and if you lock in only for a week what good is the lock?" asked Jack Tereza, broker/owner of Brooktree Realty in San Jose, CA.

Rate lock costs are just as variable from lender to lender. Some charge up-front fees, others levy fees at settlement, still others add a fraction of a percentage point to the loan's rate. Cost can also vary based on the length of the lock period, any options you might choose and the mortgage program itself.

With so many variables, a written lock is mandatory. Oral agreements won't withstand legal scrutiny, should it come to that.

The written lock contract should lock in as many variables as possible -- the interest rate, points, initial lock date, lock period, lock cost, post-lock options, and all the other details.

Lock as soon as you see the desired rate -- "on application" -- otherwise you'll have to risk rates rising or falling. Locking on application is key if you barely qualify at today's rates and an increase in rates would make buying unaffordable.

In today's hot sellers' market, Tereza says the rate lock -- a lender's promise for a given interest rate and other loan costs -- goes hand-in-hand with a preapproval -- a lender's promise to loan you a given amount.

"My buyers have to be preapproved before I will present their offer. When you submit your offer if you aren't preapproved and there are two others who are preapproved you are dead," Tereza said.

Published: August 25, 2004

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.