An online mortgage company recently settled a civil lawsuit with the Federal Trade Commission that charged the company with deceptively advertising low “fixed” rate mortgages that actually had adjustable rates. The website’s disclosure page revealed the discrepancy. But the law is clear that hiding terms in the fine print that directly contradict the predominant advertising message is not allowed. The FTC Complaint also said the company and its websites failed to disclose important information, including the annual percentage rate (APR), required down payment, and repayment terms of the loan.
The Better Business Bureau encourages consumers to carefully consider the following tips when shopping for a home loan:
• Comparison shop. Read lender reviews. Compare rates and fees. The Mortgage Shopping Worksheet provided by the FTC at www.consumer.ftc.gov/articles/ pdf-0104-mortgage-shopping -worksheet.pdf can help you create a side-by-side comparison of loans.
• Don’t just settle for the lowest initial monthly payment. Loans with variable interest rates may start with a lower fixed interest rate for a limited time. When that initial period is over, your monthly payments will go up when interest rates rise.
• Ask the lender for current interest rates, if a rate guarantee is based upon a down payment amount or minimum loan amount, and for the APR, which includes points, broker fees, and certain other required credit charges, as an annual rate.
If your down payment is less than 20 percent of the loan, some lenders may require you to purchase private mortgage insurance, which protects the lender if you are unable to pay on the loan. Before agreeing to a loan that requires private mortgage insurance, ask about the cost.
Home loan interest rates and points can change daily. When signing loan documents, be sure to check the rates and fees against those promised or guaranteed during the loan application process.
Mortgage ads boasting vague and very low rates or very low monthly payments are likely deceptive. If the ad seems too good to be true, then it is. Also beware of look-alike mortgage lenders that sound reputable but are just capitalizing on the reputation of a trustworthy lender.
You can find more answers to your mortgage questions by visiting the Consumer Financial Protection Bureau’s mortgage webpage at www.consumerfinance.gov/ mortgage/.
To research a lender or report a deceptive ad, visit the BBB at www.bbb.org or call (509) 455-4200.
By Erin T. Dodge, BBB editor