FTC Consumer Alert
Federal Trade Commission Bureau of Consumer Protection Division of Consumer & Business Education
Deceptive Mortgage Ads:
What They Say; What They Leave Out
If you’re looking for a mortgage to buy a home or refinance an existing loan, you may see or hear ads
with offers of low rates or payments. Whether you see them on the Internet, on television or in the paper,
or whether they come by fax or mail, some of these ads look like they’re from your mortgage company or
a government agency. Regardless of where you see the ads, remember that while the offers are tempting,
some are terribly flawed: they don’t disclose the true terms of the deal as the law requires.
The Federal Trade Commission, the nation’s consumer protection agency, says that when you’re
shopping for a home loan, it’s important to understand all the terms and conditions of a proposed loan.
Start with what is in the ad itself. Read what’s between the lines as well as what’s in front of your eyes.
What The Ads Say
To help you recognize an offer that may be less than complete, the FTC wants you to know the buzz
words that should trigger follow-up questions, as well as information to insist on after you’ve read an ad.
A Low “Fixed” Rate: Ads that tout a “fixed” rate may not tell you how long it will be “fixed.” The
rate may be fixed for an introductory period only, and that can be as short as 30 days. When you shop for
a mortgage, you need to know when and how your rate, and payments, can change.
Very Low Rates: Are the ads talking about a “payment” rate or the interest rate? This important detail
may be buried in the fine print, if it’s there at all. The interest rate is the rate used to calculate the amount
of interest you will owe the lender each month. The payment rate is the rate used to calculate the amount
of the payment you are obligated to make each month. Some offers advertise a low payment rate without
telling you that it applies only during an introductory period. What’s more, if the payment r