Western Montana & Missoula Real Estate Blog & Area Information

 

ADVERTISING – Those ads that seem too good to be true.

 

 

I have been in the mortgage business for 17 + years.  I have seen so much advertising when it came to mortgage companies and how many of the ads were misleading or just flat out lies.  Those companies advertising low rates that didn't happen.  This easily went on from 1992 to 2002. I always wondered why this wasn't regulated as strongly as it should have been.  I found out that some of these companies had 100's of complaints, yet they still operated for those 10 years. I think this is misleading and I call it Shark Advertising.  It's dangerously misleading, yet it worked for many companies, at the expense of the borrower.

 

 

 

If anyone has noticed, we haven't see as much advertising from mortgage companies or large banks in the last 18 months or so. I am now seeing a few mortgage companies advertise on the radio and as of lately, a few advertise on TV, especially ESPN. The ads are misleading because they appear to make you believe that it's being backed by the government.  (Miriam Bernstein made this comment below that explains this part..  - Comment # 30 -)Has anyone seen a few ads on tv that look like a news update, a spokesperson telling you about government funded programs or that the government is helping in sponsoring these programs. Yet if you read the fine print, it's a mortgage company, disguising this ad very carefully, spinning it as thought the government is putting this out to the public??

I am even seeing this more and more in such places as Facebook. Below are a few that I am seeing on Facebook now.

 

 

 

 

 

Here are some ads found on facebook and comcast.net. As you can see, these mortgage companies and or companies that are lead generators, make you think that the government is behind this.  Obama hasn't asked homeowners to refinance. The first one on the left, upper left, is from a company called Lower My Bills.  They sell leads to other mortgage companies, after they have gathered your information online. Then you have like 4 to 10 lenders call you, sometimes daily.

 

 

 

 

 

 

 

 

People on Facebook that give basic information – eye catchers to pull you in.

 

Here is a loan officer on Facebook that placed this on his Wall, to capture the attention of others. You just need to be aware of what you read. Sure, this can happen, but there are some unknowns not mentioned. And sometimes the loan officer will raise that unknown, so you can't obtain that great rate and get the next best thing.  Keeping in mind, it's not always about the Best Rate.  How service?  Integrity?  Educating the borrower? And so much more....  Please read : I want the same deal that my friend receivd...  &  Mortgage payment vs Interest Rate

 

 

 

 

Web Sites that are deceiving !!!!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As I explained in this blog post, deceptive web sites, here is a great example above. Doesn't this look like it could come from the USDA themselves?  But it isn't. It acts as a lead catcher, catching your info to call you and or sell you about USDA loans or any other type of mortgage loan. No Cost Obligation is mentioned on the site. - We always love to hear about free things, but are they free overall?

 

 

 

 

 

Here is a FAVORITE of mine !!!

 

 

 

 

 

 

 

 

 

 

 

I am sure many of you have seen this one on tv, FreeCreditReport.com. The commercial announces a free credit report. But at the very end, it says that you need to enroll in their Triple Advantage program.

A free credit report?  They have tons of commercials &  commercials cost money to display on TV. They also have like 3 to 4 different kinds of commercials and.  producing commercials cost money.

 

Well, I feel like an investigative reporter for the news. I filled out my info online, trying to see what I get. It says that it takes 3 to 5 days for me to obtain these credit reports from the 3 credit agencies. (giving my credit card #) And then there is a button that says, to obtain your 3 reports now, click here. Imagine that, it's asking for $24.95 now. See the 2nd paragraph on the left, highlighted in yellow?  It talks about the new Federal Law and I am wondering if that is what they are sending me now, because that is free. But from what I know, you have to go to annual credit report to get the free reports.

All 6 commericals - Free Credit Report.com

 

 

 

Conclusion :   Just be very careful of what you read and what says free, when it might not be free.  I always have said, someone has to pay for it from some where. Is it you?  Is it me who pays for it?

Overall....No matter what, consumers will fall for some of these ads.  It's called false hope.  Especially when desperate, you just want to believe that someone can help you.. or, that it's cheaper with them than the others.  thanks

 

 

• Shopping for mortgages - The Public Image of Advertising that is misleading !!!! - Part 1 of 2

• Shopping for mortgages - The Lending Trees of the World (lead generators) - Part 2 of 2

 

 

Advertisements - Is the grass greener on the other side?

 

 

 

                    

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Experience & Knowledge at its BEST !!!

 

 

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For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

 

 

Copyright © 2009 by Jeff Belonger of Infinity Home Mortgage Company, Inc

There are tons of first time homebuyers out there negotiating the best deal on their new home, and now it's time to get a mortgage.

Most of them only know how to ask one question:  What's the Rate?

We've been in the mortgage business for over 20 years - and the only thing most people know to ask is - "What's the Rate?" 

While that's a great question, it's kinda' like going into a shoe store and asking if they have any shoes in a size 9.  Just shopping the rate is not necessarily going to get you the best price.

And what is the best price anyway!?!  Most of the clients that call us speak to my husband, Steve.  The first thing he ALWAYS says is, "hey, thanks for calling!  So you were referred to us by (insert name of friend, co-worker, agent, builder)?  That's great! 

So, tell me a little bit about what you're trying to do."

I share an office with him - and after listening to him say this for like the 90th time I turned and looked at him saying, "THEY WANT TO BUY A FREAKIN" HOUSE!"  He wasn't amused.... but once calmed down he explained to me why he askes that question, that way (and why it will help you when shopping for a loan).

Most clients answer the question of what they are trying to do one of these ways...

• They want to buy or refinance but keep their payments at a certain amount
• They want to buy or refinance but they don't have a ton of cash to work with
• They want to buy or refinance but they can't verify all of their income
• They want to buy or refinance but they need it to happen in like 5 days
• They want to buy or refinance but they think they have some credit issues

Each of these items will help the loan officer determine which mortgage program (like those different kinds of shoes) will work for you!  The PROGRAM will then help us get to a mortgage interest rate... and knowing your credit score and how much money you want to part with for closing costs will determine your rate.

So let's assume you figured out which program you are going to use to finance your home - YIPPEE!  One more step in the process!  Now you can just call loan officers and ask for their rate on that program and those terms with your credit and compare - it's not even that easy!

You want to be certain that you are working with an experienced loan officer.  The largest fianancial transaction of your life is far too important to place into the hands of someone who is not capable of doing more than just quoting you a rate.

So here are some other questions for your loan officer:

What's the next Economic Report coming out that might effect the direction of Mortgage Interest Rates?  A seasoned loan officer will have this information at their finger tips, and will know, for instance, that the FED says it will stop purchasing Mortgage Backed Securities in October of 2009, which could cause rates to go up...

When Bernanke and the Fed "change rates," what does this mean... and what impact does this have on mortgage interest rates?  The answer is not obvious.  The Fed has some impact over SHORT TERM rates, like those on your credit cards, however very little actions the Fed takes (especially recently) has created a lower movement of Mortgage Bonds.  Because of the "bad name" associated with Mortgage Bonds in the SubPrime market, fewer people are purchasing these bonds... That's why it's important to note that the Fed says it will stop purchasing Mortgage Backed Securities in October (If you have other questions about this just call us!)

Once you believe that you are working with a seasoned loan officer, there are other points to consider... If you talk to 3 lenders who all tell you the rates are at 5.25% and you talk to another person who says they are at 5%... well, you've got to question what that lower priced lender is doing.  For the most part, rates are rates.  The cost of money is pretty close to even across the board - so, if it sounds too good to be true, it probably is. There could be extra fees, or they could be quoting a rate that is only good for the next 12 days.

You get what you pay for!  If you are looking for the cheapest deal out there, understand that you are placing a highly important process into the hands of the lowest bidder. (If you've ever had a cheap haircolor job or a cheap haircut, cheap pair of shoes that KILLED your feet or fell apart  - you know what I mean). 

All too often, you don't know until it's too late that the cheapest isn't BEST.  Remember that missed closing dates in NC can now mean a FINE to the buyer.  Most "internet companies" do not operate in the State of North Carolina and do not know our laws - or even how we close loans. 

If someone mentions closing at the Title Company - you know you're dealing with someone who's not from here, and some delays and differences in quoted closing costs and actual closing costs will likely occur.

Understand that Interest Rates and Closing Costs go Hand in Hand.  When someone asks me for a rate - I ask them which one they want.  I'm not being sarcastic (well, okay maybe a little) but we have interest rates from 2% to 10%.  It depends on the program and the amount of money you want to pay out of your pocket. 

Many first time homebuyers want the smallest amount of closing costs (so they can buy a hot new leather sofa!) and will therefore take a slightly higher interest rate - so that the lender pays the closing costs.  A professional lender will be able to offer the bst advice and options in terms of the balance between interest rate and closing costs that correctly fits your personal goals.

So our advice is to be smart.  Ask questions... but don't just ask what the rate is! 

Call Steve and Eleanor Thorne 919-649-5058.  We've been mortgage Lenders in North Carolina with the best mortgage rates for decades!

 

APR Predators and APR Demystified

First, lets demystify Annual Percentage Rate (APR).

APR was designed to allow consumers to use one standardized number to compare the real cost of each lender's interest rate and it works like this.

If I lend you, $10,000  and, I charge a $500 Bump-ta-Bump Fee, you will actually receive $9,500, however you must still repay me $10,000.  APR is my real yield and your real cost on this loan.

We agreed that you will repay the loan at 8% interest on $10,000, HOWEVER you only received $9,500 therefore I will earn more than the 8.0% interest rate I charge on $10,000.  In this case, my yield (APR) is 9.799% on the $9,500 you received.   

APR is the lender's yield on dollars actually lent ($10,000 minus $500 = $9,500); in this case, the lender's yield (APR) on $9,500 is 9.799%   (APR is computed as if the above example is a 30 year loan)

The $9,500 also represents the Amount Financed in the Truth In Lending (TIL) disclosure. 

For those of you who use spreadsheets the Rate Function will find APR.  Use the Amount Financed for Loan Amount and use the monthly payment on the actual loan amount.

Fees that must be subtracted from a mortgage loan to properly calculate Amount Financed for APR

Origination and Discount Points

Processing and Lender Fees

Pre-Paid Interest (Use 15 days when closing date is unknown)

Monthly Mortgage Insurance must be added to the payment of all FHA loans and Conventional loans greater than 80% loan to value. 

The inclusion of Mi or MIP accounts for the large spread between Rate and APR on loans with mortgage insurance.

     Note: Fees Not used in APR calculation; third party fees such as appraisal and credit.

How Do APR Predators Work?

Many sophisticated borrowers shop interest rates by searching for lowest APR which, if property stated, is the real cost of borrowing.  Unfortunately, APR is not always stated properly.

How is advertised APR is misstated? 

• Prepaid Interest is not included - most common deception and true on all online Rate sites   i.e.: Bankrate.com, Interest.com, Mortgage101.com, ShopRate.com, etc.
• Prepaid Interest is understated - must be 15 days when closing date is unknown.
• MI or MIP is not included in the APR on any online rate sites, Bankrate etc.
• Some lenders do not include MI or MIP on their web sites such as Amerisave.com 
• Lender fees are either understated or not included in the APR calculation.  This is a tricky one because No or Low Lender Fees does not necessarily indicate a predatory lender.  Some lenders charge a higher rate and no points or fees for their so called "Zero Cost" loan.  However, the "Zero Cost" rate will always be higher than a rate with points and/or fees. 
• Notes to the above: 
  • there is no such thing as a Zero Cost loan and some states prohibit lenders from advertising Zero Cost Loans.
  • The spread between Rate and APR on loans greater than 90% LTV should be at least 0.700%.  When it is not... you are being scammed

Rate - Points - Fees are all interdependent

The best way I can explain this is show various Rate - Point - Fee combinations where the lender is making the same gross profit on each combination. 

In the examples below, we will use a $200,000 loan amount and Lender gross profit of $1,000, on a day when the Lender's cost for a 5.000% rate is par (0 point).

Best Rate:  $1,000 Lender profit in various combinations of points and fees

Rate	Fees	Points	APR	Profit
5.000%	$1,000	0	5.044%	$1,000
5.000%	$500	0.250	5.044%	$1,000
5.000%	$0	0.500	5.044%	$1,000

Lowest Fees: You pay $0 points and fees and Lender's investor pays the lender $1,000 for the higher rate.  

Rate	Fees	Points	APR	Profit
5.125%	$0	0	5.125%	$1,000

The point here is that lenders design their loans to provide talking points for their sales staff (loan officers).  They all require a certain profit margin and it is not important the way the loan is structured as long as the closed loan delivers their margin. 

This illustration also points out the value of correctly stated APR as a way of evaluating the true cost of a mortgage loan.  For sake of these illustrations, prepaid interest was not used.  If 15 days PP was calculated it would have increased each APR by 0.019%.

Bill Ladewig, Your FHA Guru (and APR)

800.664.7283 (SAVE)

Bill@YourFhaGuru.com

Mortgage Mentor Website