I was reading Seth Godin's Small is the New Big and found a riff that applied to the age old question:

Is it better to float your mortgage rate, or to lock your mortgage rate?

I am a bird-in-hand type of guy and I advocate locking your mortgage rate 100% of the time.  As I see it, no matter what rates do between today and the "future", floating is an option that has losing scenarios; locking your rate has none.

So, then I read Seth's "Gain or Loss" scenario.  It goes like this:

When a lottery reaches $100,000,000, a lot of people buy $1 tickets for the chance to win.  The odds of winning are one-hundred-billion-to-one, but that doesn't deter somebody who wants to win the prize.

Reverse the scenario. 

How much would you sell tickets to people so that if your number came up, you'd give away everything you owned -- figure it to be a million dollars. 

Rationally, if you were willing to pay $1 to win $100,000,000, you should be willing to sell tickets to lose $1 million for one cent.  This is because the odds have not changed in "your" number coming up.

Would you risk losing $1,000,000 for $0.01?

If the answer is no, then your fear of loss is greater than your desire for gain.  The odds of the game haven't changed, after all. 

Would you sell it for $100?  What about $1,000?  Would it take more?

Regardless, if you need more than one cent to sell a ticket, you are a person that should be locking your mortgage rate instead of floating it. 

As it relates to mortgage rates, ask yourself: Would saving 0.125% on my rate make me happier than the sadness of losing 0.125% on my rate? 

If your fear of loss outweighs your desire for gain, you should be locking.

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Dan Green is an active loan officer. Email or call 513-443-2020. Dan is on Twitter at @mortgagereports.