If rates drop enough, a float down policy will come into play as an option. You can float your rate down after your rate lock only if the following scenarios apply, and it wouldcost a 0.5% hitto your closing costs (0.005 x Loan Size) to utilize the float down. These scenarios do not occur often, and we suggest you only lock in on pricing that you are happy with, as most likely you will close without floating down your rate.
Two Possible Scenarios:
Your Loan is Formally Approved with Conditions
If rates have improved at least 0.25% with your same closing costs or better you can float down to that rate with a 0.5% pricing hit.
Your Loan is Clear to Close (No Conditions Left)
If rates have improved at least 0.125% with your same closing costs or better you can float down to that rate with a 0.5% pricing hit.