Are mortgage rates keeping you up at night? You are not alone. Choosing when to lock a rate or whether to pay for a float-down is one of the most important money decisions you make between contract and closing. In Prescott and greater Yavapai County, timing and the right lock strategy can protect your budget and keep your deal on track. In this guide, you will learn how rate locks and float-downs work, what lock length fits most local timelines, and the questions to ask every lender before you commit. Let’s dive in.
What a rate lock means
A rate lock is your lender’s written promise to honor a specific interest rate and points for a set time, as long as you close within that period and your situation does not change in a material way. The lock starts when your lender confirms it in writing and states the expiration date and terms. It typically references both the rate and the number of discount points.
Why it matters: rates can move daily. A lock gives you payment certainty and protects your buying power while you work through appraisal, underwriting, and closing steps.
Always confirm the lock terms in writing. If it is not in writing, you do not have a guaranteed lock.
Floating and float-downs
When you float, you choose not to lock and accept market movement. If rates fall, you may capture a lower rate. If rates rise, you risk a higher payment.
Floating: risks and rewards
- Potential reward: you may secure a lower rate if the market drops before you close.
- Primary risk: rates can rise quickly, which can increase your monthly payment and total interest cost.
- Best fit: only if you can tolerate risk and have a clear plan to lock at trigger levels.
Float-down options explained
A float-down is a contract feature that lets you reset to a lower market rate during your lock window if rates drop. Lenders offer it in different ways:
- No float-down: standard lock, no changes if rates fall.
- One-time float-down: reprice once during a set window, often later in the lock period.
- Multiple or automatic float-downs: less common, often priced at a premium.
Rules lenders often use
- Eligibility windows: many allow float-downs only after key milestones or in the final 30 days of the lock.
- Minimum drop: some require the market rate to be at least 0.125 to 0.25 percent below your locked rate to trigger.
- Fees: may be a flat fee, added points, or a slightly higher initial rate.
- Points and credits: some lenders restrict float-downs if you buy discount points or use certain credits.
- Documentation: the float-down must be in writing to be enforceable.
Common lock periods in Prescott
Across the market, typical lock lengths are 30, 45, 60, 90, and 120 days. Some lenders offer shorter 15-day or longer 180-day options. Longer locks usually cost more or carry a higher rate.
Resale timelines
Most resale homes in Prescott close in about 30 to 45 days from contract. A 30 or 45-day lock often fits this schedule. If you have longer contingencies or a seller leaseback, a 45 to 60-day lock may be safer.
FHA, VA, and USDA
Government-backed loans can take longer to process depending on lender staffing and appraisal timelines. A 45 to 60-day lock is often safer than 30 days for these loans.
New construction or rehab
If you are buying new construction or a property that needs major work, closing can run 90 to 120 days or longer. Ask about 90 to 120-day locks, staged locks, or re-lock options closer to completion.
Local timing factors
Yavapai County has a small to midsize market feel, with seasonal swings and unique property types. Rural title items, HOA approvals, and second-home schedules can add days. Always coordinate with your escrow and title company and build a buffer into your lock.
Costs, fees, and tradeoffs
- Float-down cost: paying for a float-down reduces your savings if rates only fall modestly. Sometimes the option is baked into a slightly higher rate.
- Lock extensions: if your closing slips past the lock expiration, most lenders charge an extension fee or reprice at the then-current rate. Extensions can be more or less expensive than buying a float-down, so compare.
- Floating without a lock: you might save if rates fall, but you carry full exposure if they rise. This can affect your approval and monthly payment.
The right move depends on your risk tolerance, expected timeline, and the price of each option.
Timing strategies for Prescott buyers
Match your lock to your contract timeline and your comfort with risk. Use these practical approaches.
- Firm closing in 30 to 45 days: lock early with a 30 or 45-day term. This reduces risk and can strengthen your offer since you are less likely to face last-minute payment changes.
- Uncertain closing or longer contingencies: compare a longer 60 to 120-day lock to the cost of possible extensions. Ask whether a one-time float-down is cheaper than buying extra lock time.
- Expecting rates to drop and can tolerate risk: consider floating with a clear trigger. For example, instruct your lender to lock if rates drop 0.25 percent or if markets start rising.
- Staggered approach for new construction: lock once key dates are firm, then re-lock or float-down closer to completion if your lender allows it.
Conservative resale buyer
- Scenario: conventional loan, standard Prescott resale, 30-day escrow.
- Strategy: lock at contract for 30 to 45 days. Ask if a one-time float-down is available in the final two weeks.
Budget-sensitive buyer expecting lower rates
- Scenario: flexible contingency window and strong desire to capture a dip.
- Strategy: float with a written lock trigger and a payment backup plan if rates rise before you lock.
New construction timeline over 120 days
- Scenario: completion timing uncertain.
- Strategy: do not lock until the completion month is set. Compare 90 versus 120-day lock premiums, float-down availability, and extension fees.
Lender questions checklist
Document the answers to these questions in writing so you can compare offers side by side.
- When does the lock start and when does it expire? How is the start date defined in writing?
- Is there a float-down option? What is the cost, eligibility window, how many times can I use it, and what minimum rate drop is required to trigger it?
- What is your re-lock policy if closing is delayed? What are typical extension fees for 15, 30, and 45 days?
- Do discount points or lender credits affect my float-down eligibility?
- Does your rate quote include lock fees or underwriting and processing fees?
- Will you provide a written rate-lock agreement that lists the rate, points, lock period, float-down terms, and any fees?
- If I lock now and rates fall later, can you renegotiate or offer a courtesy re-lock?
- For new construction, what are your policies for staging locks and re-locking at clear to close?
- If the lender causes a delay, who pays the lock extension fee?
- Can you show a payment comparison at the locked rate versus a rate that is 0.25 percent higher and lower?
Documentation and protections
- Written confirmation: insist on a written rate-lock agreement that states the locked rate, points, lock period, any float-down terms, and fees for extensions.
- Required disclosures: expect a Loan Estimate early and a Closing Disclosure before closing. Lock terms should align with those disclosures.
- Licensing and complaints: you can verify lender or broker licensing through Arizona and national resources, and there are formal complaint channels if needed.
How to compare lenders
When rates are close, lock and float policies often decide the winner. Ask each lender to price the same scenario, including:
- Locked interest rate and points for your target closing date
- Float-down availability and cost
- Extension fees and re-lock rules
- All fees tied to the lock or float-down
Then compare the total projected cost under a few simple what-if moves, such as a 0.25 percent rate drop or rise.
Local planning tips
- Start early with your title and escrow team. Prescott offices can vary in processing time, so coordinate your target closing date with your lock length.
- Build a cushion. Many buyers lock 7 to 10 days longer than the planned close to reduce extension risk.
- Use your lock status as leverage in a competitive situation. A firm preapproval and a confirmed lock can help demonstrate certainty to a seller.
- For FHA and VA loans, ask about underwriting turn times. Lower volume on government loans at some lenders can lengthen processing.
Key takeaways
- Lock when you want payment certainty, have a firm closing date, or need a stronger offer position.
- Float only if you can tolerate risk and have a clear trigger to lock.
- Consider a float-down when you want upside if rates fall, and only after weighing the cost against likely benefits.
- Always get rate-lock, float-down, and extension terms in writing, and compare lenders on these features, not just the headline rate.
If you want help syncing your financing timeline with your Prescott purchase or sale, reach out for local guidance. Connect with Peter Fife to align your lock strategy with your contract dates, compare lender terms, and move with confidence. If you are selling as part of your move, you can also request a free home valuation to plan your next steps.
FAQs
What is a mortgage rate lock and how does it protect me?
- A rate lock is a written agreement that holds your interest rate and points for a set period so you can close without worrying about market rate increases.
How long should I lock for a Prescott resale home?
- Most resales close in 30 to 45 days, so a 30 or 45-day lock usually fits. Add a small buffer if contingencies or title items could extend the timeline.
When does a float-down make sense for Yavapai buyers?
- A float-down can help if you want protection plus the chance to benefit from a rate drop, and if its cost is lower than likely extension fees or the savings you expect.
What if my closing gets delayed past the lock expiration?
- Your lender will usually charge an extension fee or reprice the loan at the current market rate. Ask for extension costs in writing before you lock.
Are float-downs available on every loan program?
- No. Availability, timing windows, fees, and rules vary by lender. Confirm eligibility, costs, and trigger rules in a written agreement.
Should I float my rate if I think rates will drop soon?
- Only if you can handle the risk of higher payments and you set a clear lock trigger with your lender. Otherwise, consider locking with a reasonable term or a float-down option.
