10 ESSENTIAL QUESTIONS FOR AVOIDING THE RATE-LOCK HEAD-LOCK

In many real estate deals a key tool for home buyers when applying for a loan is to "lock in the interest rate." A "Rate-lock." Well, that was the old days. Now, a rate-lock can backfire, putting you in a head-lock. What to do? Here are ten essential questions you should ask your mortgage lender before locking in those rates.

1. What must I do to lock in a rate?

2. What if the market rises before the rate is locked?

3. What if the market falls before the rate is locked?

4. What, exactly, is locked and what is not?

5. Do I have to pay any thing to be able to lock?

6. Could that payment be refunded for any reason?

7. If the market drops after my rate is locked, how does that affect me?

8. After I lock the rate, can I change any part of it? What if I decide later to buy down with points?

9. How long is the lock good for? What happens if the lock expires?

10. If my rate-lock expires and then I cannot get the loan, can I still get my earnest money back?

11. Bonus question: Can the lenders cancel or re-state the rate lock conditions if they are bought by another bank?

These are just the questions. But I've found that if one has to know either the right questions or the right answers, I'll take the right questions nearly every time.

And one final question: If you do the rate-lock now, will it feel more like a head-lock later?

These points were based in part on a great article by Jack Guttentag, professor of finance emeritus at the Wharton School of the University of Pennsylvania. His article was reported by Inman News on August 10, 2009.