Ah…the Fine Print

houseofmoneyEver read a newspaper article where someone is suing a company for misleading them? The company always says something like “we disclosed all the information to the client” as their defense. Want to see it in action? Countrywide Home Loans recently sent a client some unsolicited mail (i.e. junk mail) in which they offered a No closing cot Refi! At the top in big letters on a stand-out blue background it says:

“Pay hundreds – or even thousands at closing

or PAY ZERO with Countrywide.

You Decide.”

The one page letter is filled with stuff like that including a “Reservation #” because of how special this deal is.

Guess what it says on the back on the bottom third of an otherwise blank page in 8 point font that is grey (I guess black would draw too much attention?)? “Affects pricing. With the No Clsoing Cost Option, borrowers finance the closing costs instead of paying for them at closing. Borrowers who pay closing costs at closing may qualify for a lower interest rate.”

So, I guess if they were going to tell the truth the front should say:

“Pay hundreds – or even thousands at closing

or PAY A HIGHER INTEREST RATE that could add up to thousands or tens of thousands

over the life of your loan.

You Decide.”

I guess that wouldn’t sell to well?

If you ever see or hear about a loan with no closing costs or fees, you are paying a higher rate than you would otherwise.

If you ever see or hear about a loan with a really low interest rate, you are either geting a loan with a buydown (lower interest for a very short period of time — as little as 6 months) or you are paying a LOT of closing costs.

Those are the only two ways it works.

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