Deceptive Mortgage Advertisements: What They Say, What They Leave Out and What They Ultimately Cost
Make sure the mortgage offer you received discloses the true terms of the deal as required by law and not just something to get you hooked
If you’re shopping for a home loan in North Carolina, you’ve probably seen ads boasting ultra-low rates or payments, online, on television, in newspapers or in mailers. These offers can draw you in, but they often omit key facts required by the federal Truth in Lending Act and North Carolina law. Before you sign anything, learn to spot the fine print and ask the right questions.
Important terms to understand
Interest rate alone does not define your loan’s cost. You must know how long a rate is fixed, what fees apply and whether your payments will cover both principal and interest. Deceptive ads may bury or omit these details.
Buzzwords that demand follow-up
- “Fixed” rate – Find out how long it stays fixed. Some lenders fix rates for just 30 days before resetting.
- Very low rates – Determine if the rate applies to your entire loan or only to an introductory period. If your payment rate is below the interest rate, negative amortization will increase your balance.
- Low payment amounts – Check whether the payment is interest only. Interest-only or balloon loans postpone principal payments, leading to a lump sum due later, new closing costs or refinancing risks if home values fall.
How teaser ads lure you in
- “Mortgage rates near 30-year lows! As low as 1%! $300,000 loan for just $900 per month!”
These ads often hide that the rate resets after a brief teaser period. Without confirming your payment schedule for every month, you risk payment shock when rates jump.
- “Important Notice from Your Mortgage Company, Account Information Enclosed. Do Not Discard.”
Such mailers can look official but might originate from a different lender or broker. Always verify the sender’s name and address against public records or your closing documents.
- “Exclusive interest rate reduction program, Contact us immediately.”
Offers that mimic government letters or use urgent language can be from companies unlicensed in North Carolina. Check licensing at ncdoi.gov before responding.
Key questions to ask
- What will my monthly payment be for every month of the loan, and can it increase?
- Does the payment include escrow for taxes and insurance?
- What is the loan term?
- Are there prepayment penalties?
Ask for a full amortization schedule. If there’s an introductory rate, confirm when and how much your payment will rise.
Some loans require you to pay property taxes and homeowners insurance separately. Request an estimate to budget accurately.
Know whether it’s a 15-year, 30-year or another term, and whether any balloon payment applies at the end.
Find out if you’ll be charged for paying off or refinancing your loan early, especially important if you want to refinance before a teaser rate resets.
North Carolina consumer resources
- NC Department of Justice Consumer Protection Division: file mortgage complaints and get guidance
- NC Department of Insurance: verify lender licensing and find mortgage counseling programs
- Consumer Financial Protection Bureau at cfpb.gov: compare APR and loan estimates
- Local housing counseling agencies: HUD-approved nonprofit counselors offer free workshops
By digging into the details, asking clear questions and using North Carolina resources, you’ll avoid deceptive ads and secure a mortgage with terms you can trust.