What is a Float Down Option? |
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Answer:
Because mortgage rates fluctuate incessantly, a few Furthermore, this procedure helps lenders avoid borrower fallout. Fallout occurs when an applicant withdraws their mortgage application because they have received a better deal. Even though a rate lock is an effective way to avoid an interest rate increase, there are cases in which mortgage rates decline prior to the closing date. Since borrowers want to receive the lowest rate possible on their home loan, lenders offer a float down option, which lets borrowers re-lock at a lower rate. To receive a float down, both lender and borrower must agree to the condition prior to closing. Because float down rates do not benefit the lender, the lender rarely initiates this option. Borrower must be familiar with this option, and ask to include a float down option within the loan agreement. Not surprisingly, mortgage lenders set a minimum price reduction. For example, if the lender establishes a minimum price reduction of ½- percentage point, borrowers are unable to re-lock if rates only decline by ¼-percentage point. Trackback(0)
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