A “float down” is an option a lender might offer you, and it works like this: you apply, lock in your rate, but you still want to be able to get a lower rate if rates go down.

There are a variety of float downs available. Some say that if you lock in your rate up front, the current rates have to go down at least ¼% for your rate to go down 1/8%. Some say that if there is a lower rate available any time between application and closing, you will get a lower rate. Some say that you need to pay a new application  fee or appraisal fee in order to get the lower rate (but if you’re saving money on the rate, it might be worth it.). Some are sort of vague; others are more structured and specific.

How does a float down work?

You apply, lock in, and then if rates go down, your rate would go down.

However, you want to ask your lender exactly how this happens. Who monitors the rate? Do you have the check the rate every day? Who determines if you’re eligible for the float down? Can you float down more than once?  Is there any fee for the float down?

If you were choosing between 2 lenders, and they both had the same rate, and one offered you a float down and the other didn’t, you would choose the lender with the float down. After all, what’s better than the option to get a lower rate after you lock in?

But if the two lenders have different rates, and the one with the lower rate did not offer a float down, how would you choose?

You’d have to ask yourself if you really think rates will drop during your application process. If you don’t think they will, then a float down has no value to you.

Insider’s Tip: ask your lender if they offer a float down or a way to get a lower rate even after you lock in

For more information on float downs at Amerifund, call (888) 650-7316 or fill  out this form and someone will contact you.