Nick Pakulla - Mortgage Lender Loan Officer in MD, DC, VA

Should I float my mortgage rate?  Should I lock-in my mortgage rate?  I've said it before, and will say it again!  I always recommend borrowers lock-in their interest rate instead of deciding to float their loan.  There are a few simple reasons at play here, and I'll explain how the decision to float (even when the consensus is that rates will go down) doesn't always pan out and could end up costing you - all from what happened to rates over the past 3 weeks.

Basic reasons to lock-in your loan: Is that extra $20 per month really worth it?  What if rates shoot up by .25% overnight costing you $40 per month or more? At what point do you draw the line on floating? If your rate goes up, no matter by how much, you will be upset The "interest rate game" seems like a very big deal when making the decision to move forward with a lender, but one year after you have locked-in you will barely notice or remember the process and your mortgage payment will simply be what it is If your decide to wait, and rates go up, one year after you lock-in, and every month your write your check, you will remember Rates don't always move in full eights (0.125%'s) You have no clear way of knowing exactly what rates your lender has on a given day Leave the gambling for Vegas, not the roof over your head If rates really do get that much better you can always refinance later

The only reason to float your loan:

1. You have a strong feeling that rates will get better

Well on November 3^rd the Fed announced they would by $600 billion in treasuries to boost growth aka Quantitative Easing 2

Among other things this move was (and still is) expected to continue to push mortgage rates lower.  As a borrower you could have made the decision to wait until after the Fed's announcement to get even lower rates.  The following week after the announcement inflation fears kicked in and rates jumped 0.375% to 0.5% higher.  Aka, 4.125% became 4.5% in a matter of 1 week.  That hurts.

There was also a counter argument that since everyone was anticipating the Fed's announcement, that rates already had adjusted lower in anticipation, if the Fed didn't announce enough of a treasury purchase rates would have immediately gotten much worse.  Even when something is expected, if it is expected to be at a certain level and comes out slightly different, it can also hurt.

Even still, there is still some consensus that over the next few weeks rates could continue to go back down to the low 4%'s and maybe even the 3%'s... But do you want to chance it?