4.625% Mortgages - Bait and Switch -

I did a survey at four of the "leading" online mortgage sites. The 4.625% rate seems to be popular! I decided to read the fine print they put at the bottom of the page and discovered there is more to the story. In my opinion, 99% of potential clients would not fit the criteria. I will post an actual disclaimer at the end of this post.

Not only does this smell of bait and switch, but the APR (annual percentage rate) is calculated differently at each site. People have been taught that the APR is a simple way to compare competing offers. Unfortunately, calculating an APR is more an art than a science. I have been originating mortgages for eight years and I recently completed the Indiana mandatory 24 hour educational requirements for loan originators. In addition, I passed the Secretary of State's Indiana Primary Manager test. I have not found any source that states which fees lenders must include in the APR. The requirements are general and a matter of interpretation. So how do people make an informed decision?

The first thing an individual can do is work with a company they have worked with in the past. They can also seek referrals from people they trust. In addition, always get key terms in writing. I make it a practice to give clients a written Good Faith Estimate as well as a written loan comparison. Work with companies and people you trust and always get it in writing.

(Here's the disclaimer. It's similar to all the others. Notice they charge 2.64% loan points/lender fees)

* Refinance at 4.625% Fixed. Example assumes a $200,000 loan amount with a fixed interest rate of 4.625% and Annual Percentage Rate (APR) of 4.856%. Terms of the payment are based on a 30 year term fixed rate loan with principal and interest payments of $1,028.28 per month with a 2.64% loan points/lender fees due at closing. The example assumes a credit score of 780 or greater with a loan to value (LTV) of 80% or less on a primary residence. Rate and terms offered may vary depending on your credit history and other qualifications, amount of equity in the property, location, type of property, and other factors. This program is available as of February 11, 2009 from a participating Service Provider.