Gimmick Pricing?

I receive calls everyday regarding mortgage interest rates. A common question is asked quite often. It usually goes like this. I saw online somewhere rates were 4.5-5.%, is this accurate?
Or, I heard on the radio that rates have dropped to 5%, can you lock me in at this rate?

Are these rates real or are they too good to be true! I cannot speak for every lender and every product out there, but the majority of the time the answer is "YES, it is too good to be true"!

Keep in mind advertisements always pitch the best case scenario. They feel that if they get you involved and you realize you can get 6% instead of 5.5%, you will still go with them. There are numerous "outs" to the company on the rates they advertise. How could they know your credit, income, equity position,and assets. They don't and this is why advertised rates are only good for 1 thing. That is a gauge of what the rate market.

I call rates like this "Gimmick Rates". This is because they look pretty, but you are paying for them one way or another. To get a rate of 4.5%, one of the following situations is probably taking place.

1. You are paying a high amount of points and fees in order to obtain this rate.
2. You are being offered an interest only product or an ARM. In other words, some kind of catch and not a fixed note.
3. The lender is paying out of their pocket to get you this rate.

Lets see a the number of hands of people that think the lender is paying the expense for you and losing money on your loan? Nobody? That's right. It isn't going to happen.

Great rates are out there, but the lender must make money or they will not do the loan.

This is simply a way of advertising a great deal and to make the phones ring. They will then take the person with 6.5% that is looking for 4.5% and give them 5.75%. Still a great deal for the customer, but not what was advertised.

I am sure you all see my point. Just don't get to wrapped up in the crazy rates you see posted. Do you homework, work with a good lender, and you will wind up with a great product and rate!

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