ME AND MY FIANCE ARE IN THE PROCESS TO BUY A HOUSE, WE SIGN CONTRACT AND OUR CLOSING DAY IS NOT UNTIL THE FIRST WEEK OF AUGUST.

WENT WE GOT QUOTED BY THE BANK FOR OUR RATES, THEY QUOTED US AT 5 % WITH NO POINTS, WE DIDNT LOCK, BEACUSE WE WERE TO FAR FROM OUR CLOSING DAY, AND WE CAN ONLY LOCK FOR 60 DAYS.

NOW RATES HAVE GOING UP AND TO GET 5% WE HAVE TO PAY ALMOST 2 POINTS. OUR LENDER IS TELLING US NOT TO LOCK YET. BUT WE DONT KNOW WHAT TO DO. WE DONT WANT TO TAKE THE RISK FOR THE RATES TO BE GOING EVEN HIGHER.

WHAT DO YOU THINK WE SHOULD DO?

KEEP ON FLOATING OR LOCK?

If floating is a risk to you, then lock.  But, nobody can really say if rates will go up or down.  What type of loan is it?  How much are you putting down?  How long do you plan to stay in the house?  Can you afford your monthly payment at the current rate?  Can you afford it if rates increase by .5 or 1%? 

IS A FHA LOAN, WE ARE PUTTING DOW 4%. WE ARE PLANNING ON STAYING IN THE HOUSE FOR 8 TO 10 YEARS. WE CAN AFFORD THE PAYMENT AT 5.5 BUT IF IT GOES UP TO 6.50 OR 6% IS GOING TO BE TO MUCH FOR US. LET ME PUT THIS WAY WE WILL BE EATING JELLY AND PEAUNT BUTTER SANDWISH FOR A PRETTY LONG TIME!

If you are confortable with the payment at 5.5%, then lock the rate and don't second guess yourself. Playing the "what if" game can be very risky and very nerve racking.  Don't take the risk that interest rates go up and you then can't afford to purchase your home. If they go down, does it really matter when viewing the complete picture?  You and your fiance are purchasing your first home, I'm presuming you will receive the first time homebuyer credit, which expires in 5 months, is it worth the risk to hope that interst rates go lower to save a couple of bucks? Hope this helps.

Good advise. 

Wait a week, then lock.

Easy on the CAPS there OP.  The fed is having a meeting today and tomorrow to determine whether or not to cut rates.  Keep and eye on that and if it starts to head up after that, it might be a good idea to lock in.  Being that the rate has dropped from the time you originally posted your question, you should be able to get a 5.3xx at this time.  Check back with your broker/lender