Beware of Interest Rate Advertisers...

All too many times when I'm reading financial news online, I see ads for mortgage loans. What shocks me is the misleading ads that can suck home owners into a bad loan or at best a bait and switch to a poor loan. What's more is these ads appear on trusted financial websites where professionals go to get their information.

How do you know if what is being advertised is real?

I guess you really don't unless you are on this side of the business. Now true, that the rates advertised are obtainable, and more, the payments noted are reachable true payments, what's misleading is the type of loan you will be getting and the cost that you will pay to reach that advertised rate.

It wasn't until recently that I advertised an interest rate, however, only to my existing network of home owners who have requested information from me in the past. Not on my blog site, nor on the internet, nor newspaper do my 'advertised' rates show up.

Here's a sample internet ad I see today:
Refinance and Save $1,000S
$150,000 Mortgage for $483/month. Compare up to 4 free quotes.

So, what's wrong with this ad?

No APR, No Rate, No Cost, No Qualifying guidelines mentioned.

You see, it's law, that you have to note at minimum the APR when advertising a rate or payment. It's not in the above ad.

So, what is this ad trying to sell you?

This is an option arm loan program. You see, if you use a financial calculator, you'll determine that the rate you would have to get to obtain a $483 payment on $150,000 loan is 1%. The option arm has an actual rate made up of a margin + index. Generally the index is the 12 Month Treasury Average currently at 4.788% (adjusts every month). The margin on these loans typically run 2.65% - 3.5%. Add the two together to get the actual interest rate (3.5% + 4.788% = 8.288%).

This ad should read:
Refinance and Save $1,000S
$150,000 Mortgage for $483/month. Compare up to 4 free quotes.
8.288% monthly adjustable rate, payment based on 1% payment rate APR XX.XX%. Your principal loan balance will grow due to negative amortization if you make the payment advertised.

THAT would be a real ad!

Don't be fooled by advertisments. Work with those who have a reputation for doing the right thing, for the customer, every time. That's integrity.

If you get an ad or see an ad and want the real scoop, visit us online at www.StraightTalkRE.com and click the ask an off air question. Give us the details and we'll give you the scoop!

~ CHUCK