Lock if the rate is acceptable and closing is near. Float if rates are trending down and closing is far away. Most experts recommend locking. A lock guarantees your rate; floating exposes you to market moves.
When to Lock Your Rate
Lock your rate when you are comfortable with the current rate and your closing is within 30-45 days. Locking removes uncertainty. If rates rise, you are protected. If rates drop, you miss out unless you have a float-down option.
When to Float Your Rate
Floating means you keep your rate uncommitted, hoping rates will drop before closing. This works when closing is far away (60+ days) and rates are clearly trending down. The risk is rates could rise.
Market Considerations
Look at the Federal Reserve outlook, inflation trends, and economic reports. If the market expects rates to drop, floating might pay off. If the trend is upward or uncertain, locking provides peace of mind.
Risk Tolerance
If a rate increase would break your budget, lock regardless of the market outlook. If you have a financial cushion, floating might be worth the gamble.
Historical Perspective
Historically, trying to time rate locks rarely works. Borrowers who locked at the first acceptable rate generally did better than those who tried to wait for a better rate.
