Mortgage Loan Originator (MLO) Licensing Practice Test 2026 – Your All-in-One Guide to Exam Success!

A float agreement is indeed a guarantee of an interest rate without the need to lock in points. This type of arrangement allows borrowers to take advantage of potential decreases in interest rates before finalizing their loan without committing to a specific rate upfront. During the floating period, the borrower can secure the loan at the prevailing market rates when they decide to lock in the agreement, potentially benefiting from favorable rate movements.

In contrast, the other choices describe different concepts. A variable interest mortgage involves fluctuating interest rates based on market conditions, which is not what a float agreement guarantees. The mention of an agreement to secure loan points refers to the upfront fees paid for reducing the interest rates, which is unrelated to the flexibility provided by a float agreement. Finally, a fixed-rate mortgage option does lock in a specific interest rate but does not offer the same flexibility to benefit from future rate decreases, which is a hallmark of a float agreement.