In mid-September, the Federal Reserve cut the benchmark rate by 0.5%. The news has sparked renewed interest in the homebuying market. However, some potential buyers may still be hesitant, waiting for rates to drop further to ensure they secure the lowest possible rate. If you’re feeling this uncertainty but are ready to buy, a rate float down might be the solution. In this article, we’ll explain what a rate float down is and how it could help you navigate an unpredictable market.
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How Does A Rate Float Down Work?
A rate float down is an option that allows borrowers to take advantage of a lower interest rate if rates decrease after they’ve locked in a rate but have not yet closed on the loan. This option gives buyers the flexibility to secure a better rate if the market shifts without having to start the loan process over again.
For example, you lock in at a certain rate on your mortgage, but a few weeks later, the rates drop by 0.5% before your closing date. You could potentially lower your locked-in rate by requesting a float down to the new, lower rate, saving you money over the life of the loan.
Some lenders may have guidelines when it comes to qualifying for a rate float down, including a minimum rate decrease of 0.25% or more. There may also be a fee associated, which can vary depending on the lender and the type of loan. Not all lenders offer the option of a rate float down, so be sure to talk with your Loan Officer to learn more about your specific situation.
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Benefits Of A Rate Float Down
Here are some of the potential benefits of a rate float down:
- Lower rate = lower payment: One of the most immediate benefits is that securing a lower interest rate reduces your monthly mortgage payment, making your home more affordable.
- Peace of mind: Locking in a rate can be nerve-wracking if you’re worried about missing out on lower rates. A rate float down provides the reassurance that you could still benefit from a rate drop even after you lock in.
- Long-term savings: Even a small reduction in your interest rate could save you a significant amount over the life of your loan.
- Ideal for new construction homes: If you’re purchasing a new construction home, you may be locked into your rate for a longer period than someone buying a resale home. A rate float down gives you flexibility to adjust your rate if the market changes.
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Still navigating today’s market? Check out our article on Understanding Seller Concessions and Incentives.
Is A Rate Float Down Right For You?
Lower payments, peace of mind, and added flexibility make a rate float down an attractive option in a fluctuating interest rate environment. When considering a rate float down, it’s important to understand the possible costs and terms associated with it. Don’t let the changing market hold you back. Reach out to your Mortgage Loan Originator to discuss your options for your circumstance. They will guide you through the details and help you make an informed decision.
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Why Choose FBC Mortgage?
FBC Mortgage, LLC is a leader in helping home buyers with fast and simple loans. We’re dedicated to exceptional customer service and are always available when you need us most, even at night and on the weekend. We’ll help you navigate your new home purchase, and keep you updated along the way with weekly check ins, so you know you’re taken care of. That’s one of the many reasons why 95% of our clients would recommend us to their friends and family. It’s also why the nation’s top home builders and Realtors trust FBC to help their new home buyers.
Buying a home is one of the most important financial decisions you will make. Understanding mortgages and the home buying process can help make it less stressful, and so can partnering with a mortgage lender you can trust. At FBC Mortgage, LLC, we’re dedicated to helping home buyers finance their dream home.
All information presented is for educational purposes only and not intended as financial advice. FBC Mortgage, LLC is a national mortgage lender headquartered in Orlando, Florida. Specializing in residential mortgage lending, including purchase, refinance, construction, and renovation loans. See what our clients have to say. NMLS#152859 EHL ©2024.
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