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It’s amazing how effective mortgage advertising is, but one thing is for sure, it should not be trusted. Radio, TV and print mortgage advertising works so well because it appeals to our greed…but mainly it works because most mortgage ads are packed with lies.

A Good Faith Estimate (GFE) is legally required to show you costs, rate, payment, and cash needed to close. And in the hands of an ethical mortgage broker, you can bank on the numbers.

But all too often, that is the exception, not the rule.

Radio spots, newspaper advertisements, and TV commercials, are all designed to get the phone to ring, not give you real information.

The No Cost Mortgage Lie

The phrase "no cost" in mortgage ads is a case in point. There is no such thing as a "no cost" loan, and the state of California outlawed the phrase in mortgage advertising in their state, but that does help those of you outside California.

Many large banks and small mortgage lenders alike have used this lie in their national ad campaigns. They may call their program a No Fee or No Closing Cost loan, but regardless of the name...it is one of the most deceptive of mortgage advertisements.

To understand this lie, you must understand in order for the bank or lender to make your loan a "no cost or no fee loan, they must jack up the rate. I don't see how anyone could consider a rate 1% or more above a normal rate is not "costing" the customer.
It is.

The Low Ball Rate Quote Lie

Mortgage advertisers always low-ball rates in their ads. I once worked for a company and the branch manager consistently low-balled the rate for the Sunday Newspaper display ad, saying when I questioned him on it, "Hey, I'm not paying $1200 for the ad and not getting the phone ring.”

So don't believe rates quoted in kind of mortgage advertisement.

Think about it...every mortgage customer has a different credit score, loan-to value, and income picture, so how could one rate apply to all?

Simply put, it can't.

The Missing Rate Lie

Also if the rate is mysteriously missing, that itself should raise a red flag!

When the ad on focuses on "closing costs" (or the lack of them) or the "flat fee", or the low payments and therefore the amount of "savings" you'll get....look out!

The Quicken Advantage loan ad campaign comes to mind. The ad said you could save $6000 a year with their loan. Sounds good right?

Wrong!

If you read the fine print, you would realize this mortgage had an adjustable rate and you only paid the interest with each payment.

This means if rates go up, you'll lose any savings by having to refinance again. And to add insult to injury, you may not be able to refinance to get away from the rising rate since your balance has not moved, but your home value may have dropped.

That was the plan all along, so be suspicious and don’t believe everything you see in mortgage advertising.

About the Author:

Rob K. Blake, mortgage expert and author, educates mortgage shoppers on finding local providers by state like Colorado Mortgage Brokers and Lenders and provides reviews of national companies like ABN AMRO Mortgage.