It used to be that if you locked in an interest rate, you’d have a chance at a lower rate later in the transaction and prior to closing via a “float down”. A float down may, for example, allow you to initially lock-in a 6% 30 Year Fixed rate with 0 points, only to float down to a 5.5% 30 Year Fixed rate with 0 points later in the transaction if rates fall during the processing of the loan.

Different banks, lenders and brokers have different terms to put a float down into affect. Some lending institutions will not float down at all, and the rate you initially lock-in is all they will offer you no matter how rates change. There logic is that if rates rose 1%, and they called you to split the difference and take a higher rate by .5%, you certainly would not, so why should they offer you a lower rate if rates fall. Read the rest of this entry »