5.625% Fixed Rate** I HATE THESE ADVERTISEMENTS!!!!! I am so sick of hearing about and seeing these VERY misleading ads. I have had 3 customers in the last 2 days bring this up. We all see these ads on the internet and the television. So, for all of you that don't understand HOW they are doing this, here it is. We all (banks and mortgage companies) can get you to that low rate, IF you have a 700 credit score, put at least 5% down, purchase a primary residence over $150,000, pay around $6000-8000 in points at closing, and are on a 5 year prepayment penalty..HAH! Not so good after you hear the REAL story huh? The points--many people don't understand that. 1 point is equal to 1% of the loan amount, so a $100,000 loan, 1 point= $1000. After the lender charges you 6 points plus closing costs, you are looking at a lot more money that is not going to help you in the long run. The average person refinances or moves to a new home every 4.7 years. So you do math, saving yourself $50-100 a month (depending on the purchase price) and saving it for 4.7 years, turns out to be, at the most, $4700. PLUS, you tie up a bunch of your cash upfront. Buying the rate down is not always the way to go. I advise my clients to sometimes spend a little bit, maybe a point or two, if we can get a lower rate for not a huge cost. I guess, I just got a little heated with some people actually believing that rates are around 5% and being mislead that it is very easy and cheap to get them. I hope this blog will help some people understand the TV/internet ads. Also, interest rates are not just a number, they are custom quotes. It depends on EVERYTHING, credit, income, assets, property, down payment, term, conventional, ARM, etc. As you can see-- it depends on many different things. Please spread the word to people you know that the TV/internet ads are misleading and to be careful before they sign the dotted line, they may be paying much more than needed.
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