Float Down Loan: The option for a borrower to get a lower interest rate if rates drop during the loan-application process. When a borrower locks a rate, a float-down option allows him to take advantage of a lower interest rate if rates drop during the 20 – 45 days it usually takes to fund a loan. Even without a float down, a borrower trying to take advantage of a rate drop can always walk away from a locked loan before it funds; but this may involve talking to other lenders, delaying the closing and incurring new fees, so it may not be a realistic option. The float-down option allows the borrower to get the lower rate while staying with one lender and closing without delay. Lenders charge borrowers more for a loan with a float-down option, and usually only allow the borrower to reset the price once.

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