Learning Objectives
- Explain how MBS markets move daily mortgage rates
- Describe lock terms (15/30/45/60 days)
- Compare float-down and rate-lock extensions
- Coach buyers through rate volatility without panic
Where Rates Come From
Mortgage rates track the Mortgage-Backed Securities (MBS) market, not the Fed Funds rate directly. Strong economic data usually pushes rates up; weak data and flight-to-quality push them down.
Lock Mechanics
- 15-day locks — best pricing, only for refis or last-minute purchases
- 30-day — standard purchase lock
- 45/60-day — new construction or longer escrow
- Extensions — paid in basis points per day; the borrower covers it
Float-Down Options
Some lenders offer a one-time float-down if rates improve by a defined threshold (often 0.25%) before closing. It usually costs 0.25–0.50% in points up front.
Key Takeaways
- Rates follow MBS, not the Fed directly.
- Locks are date-bound; extensions cost basis points per day.
- Float-downs trade a small upfront cost for downside protection.
End-of-Module Exam
Module 17 Exam — 5 questions
Pick the best answer for each question. Pass with 80% or higher to mark this module complete.
- 1.
Mortgage rates most directly track:
- 2.
A 30-day lock is best for:
- 3.
If a lock expires before closing, the borrower usually:
- 4.
A float-down option lets the borrower:
- 5.
When rates spike mid-escrow on a floated file, the realtor should:
0 of 5 answered