Lock or Float?

June 28, 2021

When your client goes to the grocery store, they can’t tell the grocer, “I like the price $2.50/pound price of the ground chuck, but want to come back in a month and buy it for the same price.” Nor can you do that at the dry cleaner’s, or the hardware store, or your dentist for teeth cleaning. But you, representing your client, can do it at Orion: if you like our current mortgage rates, and we offer some very competitive rates, you can lock them in for 30 days or longer.

 

With interest rates increasing in the early part of the year before reversing course in May and June, heading lower, it has brought up the age-old question for you and your borrowers: “Lock or float?” It’s a question where our brokers can add value, and provide guidance to clients. It is a very important question for borrowers since it will determine the mortgage rate they ultimately receive.

 

Here’s some advice on how experienced brokers answer it, or at least have an educated discussion with your client. Locking an interest rate means it will not change as long as the loan funds before its expiration, whereas “floating” a rate means it may go up or down until it is finally locked in.

 

It is important to consider scheduling. How long will the appraisal take? What about underwriting? If your client is buying a home, when can the seller move out? When does the client’s lease expire? When can the movers come?

 

You, as the trusted advisor to your client, can help advise them on which move to make. Nobody has a crystal ball when it comes to predicting the market, so it really comes down to if they are happy with the current rate. And rates can move every day, up or down, and Orion’s job is to obtain the best rate for you and your client possible at the time of rate lock, whether that is 60 days before closing, or6.


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