When considering the possibility of floating your rate versus locking the rate, remember there are professionals out there who spend their entire working time analyzing the market. They have a lot of money riding on the accuracy of their interest rate forecasts and the best that they have been able to 50 accuracy.
When your closing date is several weeks away, you may wish to ask your loan officer to lock your rate for a longer period of time. Lock periods up to 120 days or more are available on certain programs, but depending on the program may require a nominal upfront lock fee.
The most common lock period is the 30 day lock. The 30 day lock period gives the mortgage broker sufficient time to complete the mortgage loan. However a great benefit to using a mortgage broker over a bank is that id rates drop dramatically the broker can submit your loan to a new lender in minutes and secure you a lower rate.
If you lock your loan but do not close before the lock expires, you then are faced with worst-case pricing. If the rates have improved, you are stuck with the lock price, but if the rates have deteriorated, you are stuck with the present rate which would be worse than your rate-lock.
Why not just lock your interest rate in then for 120 days instead of 30 days to be safe from your rate going up you may ask? The answer is because the longer you lock your interest rate in for, the higher the interest rate gets. A longer lock is very risky to a bank, because they are guaranteeing that rate for an extended period of time and if rates get significantly worse, they could actually stand to lose money on the rate lock. Therefore, this is something to consider when deciding or working with your mortgage professional on locking in your rate.
The best question to ask yourself when you are considering locking a rate is: Do I really want to worry about interest rates every day, or can I live with the rate I have now? Rates can vary daily, no one can consistently predict the day-to-day fluctuations of interest rates.
If you are satisfied with the quoted rate then you should lock in your interest rate. Once the rate is locked you know that any market changes in interest rates will not affect you negatively.