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Construction loan rates -- to lock or not?

Q. My new house is being built, and I already made a commitment with a mortgage company. The rate for a 30-year fixed is reasonable. My question is: Should I lock in right now? This lock has a float period 60 days before closing. Should I lock in or continue to wait?

Paying a point for a six-month commitment on a fixed rate mortgage is reasonable, especially with a float option 60 days prior to closing. The float option will offer some protection in a downward interest rate environment, but don't expect to match the national averages for 30-year fixed if you float to a new rate 60 days prior to closing. The point paid for the loan adds about one-tenth of a percentage point to the APR of your mortgage.

New construction has the added risk that the rate lock expires before closing because of delays in construction. Make sure that the rate lock will extend past your anticipated closing date just in case the house isn't completed on time.

Bankrate has a weekly feature that surveys more than 100 mortgage professionals asking them whether it's a good idea to lock in a mortgage rate. Check out the Rate Trend Index to see what the experts have to say about whether or not it makes sense to lock in a mortgage rate. Whatever you decide, you can't be sure of getting the lowest mortgage rates between now and closing. If rates go down you'll wish you hadn't locked, and if rates go up you'll be glad that you did.

See Also
FAQ: How construction loans work
FAQ: Converting a construction loan
FAQ: Construction-to-permanent loans
FAQ: Strategies for financing a major home renovation
FAQ: Interest paid on a construction loan
FAQ: Financing the building of a new home

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National Mortgage Rates
OVERNIGHT AVERAGES
Rates may include points.
30 yr fixed mtg 4.14%
15 yr fixed mtg 3.24%
5/1 jumbo ARM 3.46%



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30 yr fixed mtg 4.14%
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* Mortgage rate may include points. See rate tables for details. Click here.
* To see the definition of overnight averages click here.

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