Home Buying in Florida>Question Details

Louis Bostick, Other/Just Looking in Florida


Asked by Louis Bostick, Florida Mon Dec 8, 2008

Help the community by answering this question:


Hi Louis,
Floating the rate means you have no interest rate protection. If rates go down prior to closing the you can get the lower rate but if they go up then your rate will be higher. Your rate is always floating until you find a home and have your offer accepted. Once that happens you have the option to LOCK your interest rate or FLOAT it. Once you lock the interest rate, that will be your rate more or less regardless of whether rates rise or fall prior to closing If you decide to float, that is a gamble you can win or lose.

As a lender, I avoid advising my clients whether to lock or float since no one has a crystal ball as to exactly what rates will do in a given month. The markets can and do act irrationally and can swing wildly even over the course of a few weeks so I take care to advise my customers that the decision to float or lock is entirely up to them. Whatever way you decide to go can depend on a number of factors such as: tolerance for risk and your qualifications (i.e. are you well qualified or will a slight movement in rates jeopardize your loan approval).

To assess your risk tolerance ask yourself this question: which situation would upset you more? If you locked your rate and they dropped 1/2% the next week or if you decided to float and they went up 1/2%?

Sorry for the long response, but hopefully this throughly answers your question. Best of luck
1 vote Thank Flag Link Tue Dec 9, 2008
To piggyback Gay's answer, right now is a really great time to lock. Strongly consider it.
Web Reference: http://www.stevekappre.com
0 votes Thank Flag Link Tue Dec 9, 2008
You do not "lock in" your rate with your lender, this is a risk and you should not do this unless you have advice from your lender that the market may go down in rates, if it goes up you may have to qualify at the higher rate. Ask your lender for the best advice. Need help in Central Florida? Please visit my website and sign up as a VIP member and get home, mortgage and area advice. Thank you
Web Reference: http://www.gaymiddleton.com
0 votes Thank Flag Link Tue Dec 9, 2008
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