I write educational posts on buying your home for the first time. I even posted my homebuying book at r/NewbHomebuyer go check it out

Here's a post from another sub, I'll add my opinion to it afterward:

Do we lock in our rate now?

I know nobody is able to say for sure what rates will do in the coming days or weeks. We are in the process of refinancing, and our credit union is currently offering 1% off market rates. The current loan estimate is showing 5.625% (based on my credit score of 723), and they calculate rates daily.

Do we lock in at 5.625% today, or wait to see what the rates do for the rest of this week? They are not offering float-downs, so once we lock it, it's set.

A lot of buyers don't realize you can lock your interest rate the moment you go under contract.

You don't have to wait. You don't have to "watch the market." You don't have to time anything.

Here's how a rate lock actually works.

When you lock, your lender is committing to honor that rate for a set period of time. Usually 30-60 days. Some lenders go longer if you're building.

If rates spike tomorrow, you're protected.

If rates drop tomorrow, you might be stuck (unless your lender offers a float-down).

Here's what most people don't know

When you lock a rate, you aren't just locking that one rate. You're locking the entire rate sheet.

A rate sheet looks something like this:

Rate Cost/Credit

6.875% $4,700 credit

6.750% $3,850 credit

6.625% $2,850 credit

6.500% $2,250 credit

6.375% $1,500 credit

6.250% $0 cost

6.125% $1,500 cost

6.000% $3,000 cost

When you "lock at 6.25%" you're really locking that whole menu. You can pivot up or down the chart as long as you give your loan officer enough notice (2 weeks before closing is helpful).

So if you weren't sure about buying down the rate yet, that's fine. You can lock today and decide later.

Float-Down

Ask your lender these 4 questions before you lock:

  1. Do you offer a float-down?
  2. How much does it cost?
  3. How far do rates need to drop to use it?
  4. When can I use it?

A float-down lets you grab a lower rate if the market drops after you lock. Some lenders offer it free, some charge a fee, some don't offer it at all.

If your lender doesn't offer one, that's not the end of the world. A mortgage broker can transfer your loan to a different lender if rates drop significantly. It frustrates the original lender, but it happens all the time.

What I tell buyers

Lock when you can. Floating is gambling.

The downside of locking is small (you might miss out on a small drop). The downside of floating is big (rates spike and your payment jumps before you close).

Once you're 2 weeks from closing, put the blinders on. Don't switch lenders over 0.125%. Just close the deal.

But before that 2-week window, if rates drop meaningfully, use your float-down or have your broker shop it.

Real example

I had clients who locked in a solid rate. Rates fell, they used their float-down. Rates fell again, their lender wouldn't do a second float-down, so we transferred to a new lender. Rates fell a third time, the new lender let them float-down again.

3 rate improvements on the same loan.

Not typical, but it shows you have options.

Sam

I write educational posts on buying your home for the first time. I even posted my homebuying book at r/NewbHomebuyer here's the book on reddit.

Originally shared by u/SamTMortgageBroker in r/NewbHomebuyer — view the original thread.