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rate float down

How man lenders offer rate float down without change in discount pts after rate lock on mortgage application.
  • September 02 2009 - US
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Answers (3)

A rate lock is effectively a paid insurance policy that insures the value of the loan product so a lender is able to sell it off and recover their investment even if the market has changed by closing.   A rate float down involves a second paid insurance policy.

Some portfolio lenders who survive by making a profit and lend their own money and retain both the investment and servicing of the loan may not need these insurance policies and may allow float downs without charge.

Conforming conventional loans are typically sold to Fannie or Freddie.  On these loans only a very small amount of less competitive lenders allow rate float downs, as it increases the insurance cost and upfront loan production cost.
  • September 02 2009
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Profile picture for Planners
This comment applies to fixed rate loans only.

For what it's worth, I think float downs are overrated for most applicants, assuming they are doing 30 to 45 day locks. If you could get an otherwise competitive rate and a float down, sure, but what usually happens is that you end up with a less that optimum initial quote and a float down that only rarely comes into play, and even if it does will rarely get you as low as you could have gotten if you had just done to the best deal in the first place.

I'm a broker, and have no axe to grind either way. I get paid the same whether I use a float down lender or not.  
  • September 02 2009
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Profile picture for chrisjonesmtg
I believe most, if not all, lenders will offer a float down if the market improves a certain percentage.  Some lenders may charge to float down, others may not. 

No lender wants to lose a loan after it has been processed and initially locked.  I would ask your loan officer if they have a floatdown policy, and if so, how it works? 

Good luck!
  • September 02 2009
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