Housia: Lock or float your mortgage rate when buying a home?

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Lock or float your mortgage rate when buying a home?

Anyone who as ever purchased a home knows the feeling... You have a purchase agreement signed. You are about to close in maybe 30 days on your new home. Now you are in touch with your loan officer and get the question: Do you want to lock your rate in or float it?

Suddenly you start looking at 10 year treasuries and wonder what the market will do in the next 30 days. Your loan officer might offer some good or bad advice as well. So what to do?

There is really no way to predict where short-term interest rates will go. To time mortgage rates when you are purchasing your home is just not a good idea. Look at today’s rate and see if you like it… if you do then lock it in. The only time when you can time interest rates is when you are refinancing, not when you are purchasing.

The only exception to the rule is to wait until the afternoon or next day if there is already a repricing in effect by movement in the bond markets.

Many lenders and brokers do offer what is called "free float-downs" after you lock. If rates improve with a quarter of a point or half a point they can let you in on the lower rate. The lenders do build this into the pricing though so you will indirectly pay for the privilege. Ask your loan officer for details.

Good luck!

-Ola Edvardsson

P.S. Don't forget to visit our mortgage center for free mortgage quotes.


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