Don’t Be Fooled by Mortgage Lender Ads

Education:  It’s the best way any potential borrower can help themselves before either purchasing or refinancing a home. One of the main areas where people are not fully educated is in regard to the advertisements that they see, hear, or read. The million dollar question you may ask yourself is, “Are these ads legit or are they just pulling my leg?”

Bankers, lenders, and brokers are all in this industry to do one thing and that is (drumroll)… to make money. In any industry where sales are involved, it can feel like its ‘every person for themselves’. With that being said, opposed to popular belief, not all lending institutions are trying to make a quick buck at your expense. Researching the company you’re looking to do business with is the most important aspect of this process. You have free resources such as Lending Tree and the Better Business Bureau (BBB) to help you.

Do advertisements inform the deal you are considering? When it comes to deciphering advertisements, arm yourself with an understanding of the mortgage jargon you will, undoubtedly, be flooded with.

Here are some examples of what you may see in mortgage advertisements. Pay attention and don’t be fooled!

• Teaser Rates:

Beware whenever rate is advertised. Too many uninformed borrowers shop only for rate thinking a low rate is everything. While, teaser rates can attract borrower attention, they just have too many unknowns. One thing to realize is that all rates you see advertised are based off of general assumptions that should be clearly listed. Look for credit score requirements, loan amount, and LTV percentages related to any offer. If you don’t find out the details first, then you may be left in for a shock when your situation doesn’t exactly match up to the advertisement you saw.

• Low “Fixed” Rate:

The one thing you don’t know upfront with this type of ad is for how long will the rate stay low and fixed? The lender could be advertising a 30 year fixed, 15 year fixed, adjustable rate mortgage, line(s) of credit, or many other things. Find out the specifics before you ever commit! Be wary if any company doesn’t openly disclose what loan product they are asking you to invest in.

• Lowest Possible Payment!

Like you just read with rate, if you run across this be aware that you’re missing some specifics. For example: Interest only payments will be, without a doubt, much lower than a payment that includes principal. The problem with this is, you will have to pay off the principal eventually. Your payment may go up in time once the principal starts getting calculated in. This can cause payment shock or, worst case, require you to pay the entire amount back all at once in the form of a balloon payment. Again, understand the details!

In conclusion, purchasing a house or refinancing your home should be an exciting and rewarding experience. Just be aware that the keys to making this a worry-free process is to thoroughly research the company you’re talking to, and educate yourself on the details when looking at the horde of advertisements you’re bound to come across.