Resource Center Interest Rates, Wall of Shame

Wall of Shame: Beware of Deceptive Mortgage Advertising Practices

Deceptive Mortgage Advertising

Deceptive mortgage advertising practices are unfortunately very common. I spend a lot of time online reading about mortgages and the mortgage industry. My email client must have picked up on this because yesterday one of the ads in my email feed read something like this: “Mortgage Rates at 2.5%.” As a mortgage professional, I knew they must be referring to an Adjustable Rate Mortgage because, in today’s market, there is simply no way any lender out there could offer that low mortgage rate on a 30-year fixed, which is the most popular loan option among most borrowers out there (and for good reason). Curious to find out how they would sell it on their site, I clicked on the ad. photo-1 Still no mention of the loan program for this fabulous low rate. And now they were really going for the kill by adding that this loan contained “No Hidden Fees, Points, or Closing Costs!” As a lay consumer, I would have been hooked. Get me this low mortgage rate now PLEASE! Looking for a full disclosure of the advertised rate, as is required by law, I noticed a link on their site. It was a small, light gray link juxtaposed over an also light gray background. It said “terms & conditions” (no exclamation mark this time, just “terms & conditions”). It was almost as if they were asking me not to click on it and to just direct my attention to the big orange button below to get me on my merry way. Despite the luring big orange button, I of course clicked on the very shy “terms & conditions” link. Don’t get me wrong, all online companies use color, font size, and punctuation to guide users through their site. It’s just that not all sites hide very important information behind subtle links. It really bothers me when sites do this. This is what I found after clicking on “terms & conditions”. photo-2 Incidentally, the colors were all gone and all the text was lumped together into large paragraphs begging me not to read them. They were screaming at me: “close this window and just go back to that big, sexy orange button in the previous screen!” Unafraid and relentless to find what I was looking for, I read on. I found it! I found the assumptions they were hiding in the dooms of their site. Be my guest and read them for yourself. I dare you! It’s ok if you’re too afraid. I understand. Let me summarize them. I’ll even increase the font size for you:

  • The 2.5% rate is for a 5-year Adjustable Rate Mortgage
  • The borrower must have good to excellent credit
  • The borrower must have average income
  • The borrower must be seeking a loan for a single family, owner occupied one unit dwelling
  • The borrower must put 30% down payment

As a borrower, I think I would want to know this information upfront. After all, these assumptions exclude the following:

  • Everyone with average credit or worse
  • Everyone with below average income
  • Everyone looking for a non-single family property
  • Everyone looking for a second home or investment property
  • Everyone who can’t afford to put 30% down payment
  • AND everyone not looking for a 5-year Adjustable Rate Mortgage

Adjustable Rate Mortgages are great products, but they’re certainly not for everyone. In fact, for the vast majority of borrowers – especially in today’s interest rate environment – a fixed-rate mortgage is the better option. So why advertise an Adjustable Rate Mortgage with such stringent requirements when this particular loan product is only a good fit for the minority of borrowers? Because they can. Because it’s an attention grabber. Because most mortgage companies don’t care if they’re misleading you so long as you go to their site and use them to get a mortgage, even if you end up paying way more than what they initially advertised. Because it’s an incredibly deceptive and perfectly legal (yes, this is unfortunately legal) way of getting consumers to notice you. Last but not least, because it works; and uninformed consumers fall for these predatory advertising tactics. We’re not here to preach about what is right and wrong or change what we can’t control. Since we can’t control how other companies in our industry behave, we’re not even necessarily here to change their practices (except to the extent we can show them that it pays to be honest and transparent). Our role is to inform and warn you – the mortgage consumer – and let you decide with whom you want to do business. But now you know that there is a better way to get a mortgage online, and with the deepest sense of humility, I can firmly state that MortgageHippo is that better way. We’ve built a mortgage calculator like no other, geared towards providing the most accurate and up-to-date interest rates based on your unique profile. We even go the next step for first-time home buyers and guide you throughout the entire home buying process. P.S. This particular company is not the only one adopting this deceptive advertising practice. Most mortgage companies unfortunately play this dirty game.

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