The mortgage offer by mail: should you accept?

“Old Fashioned” Mortgage Offers: Why Bother?

We live in the internet age and yet it is common to receive a mortgage offer in the mail. Why do you get such offers, and are they good? The answers may surprise.

Check your new rate (November 26, 2021)

The mortgage offer and targeted marketing

“You have no confidentiality,” Scott McNealy said in 1999 when he was CEO of Sun Microsystems. “To move on.”

In the past, direct mail – billions of ads sent each year – was largely based on things like ownership records and magazine subscriptions. If you have subscribed to a fishing magazine, you can expect a lot of mail from rod and boat vendors.

Now every click and every visit to the Internet is recorded somewhere. Collect several thousand data points and it becomes quite easy to identify leads for virtually any product or service, including mortgages. Whatever privacy that existed in McNealy’s 1999 is now largely gone.

Synthetic rates in printed newspapers

Senders – long before the Internet spread – understood the value of targeted marketing. Their goal is to have the most sales at the least cost and the key to this process is targeted marketing.

Why is targeted marketing effective? Several reasons stand out.

First of all, it’s cheap. Marketers only send mail to potential prospects, not to a large number of recipients. This is the difference between a rifle and a shotgun.

Second, it works. Advertisers can easily tie sales to the cost of advertising mail.

How do I get today’s “real” mortgage rates?

Third, recipients receive less mail. This happens because marketers don’t send arguments to unlikely prospects.

You don’t need a billion dollar ad budget to compete. A real estate broker or lender can send letters to every house on a given street rather than paying for a TV or radio ad that will reach hundreds of thousands of people, most of whom have no possible interest in real estate services. .

Internet marketing is simply an extension of targeted mail. The big difference is a lot more data points and performance pricing – no clicks, no fees.

The mortgage loan offer and your credit rating

If you’ve received a “pre-selected” or “pre-approved” mortgage offer in the mail, that means various data points make you attractive to individual lenders.

“Unsolicited calls, emails, and letters about competing offers are often referred to as ‘prequalified’ or ‘pre-approved’ credit offers,” says the Federal Trade Commission.

How Do Mortgage Lenders Set Your Rate Offer?

“They are based on information in your credit report that suggests that you meet criteria set by the creditor making the offer – for example, you live in a certain zip code, have a certain number of credit cards, or you have a certain credit score.

Credit bureaus and other consumer information companies sell lists of consumers who meet the criteria to insurance companies, lenders, and other creditors.

Lenders get this information from a variety of sources, including data brokers, credit card companies, and credit reporting agencies. Since you did not request this information, these are “soft” requests that do not lower your credit score.

So now you know how you got chosen, but is an unsolicited mortgage offer worth considering?

The mortgage offer and the fine print

When reviewing the offer, be aware that lenders tend to advertise the best possible rate – a rate that may only be available if you put 30 percent down and have a stratospheric credit rating. Maybe the offer is $ 250,000 at 3.75%. It’s in line with today’s best rates, but check the fine print.

The lender must legally disclose the existence of features such as lump sum payments, interest only payments, or adjustable rates. With a lump sum payment, you can get a low payout, but in five or ten years there may be a massive one-time payment.

Mortgage Disclosures: Should You Read ALL?

If the offer mentions a monthly payment, what does it include? Principal and interest of the mortgage? Principal and interest plus taxes and insurance? A payment that doesn’t even cover the interest due?

The ad must explain what the payment includes to be in compliance with loan laws.

There is nothing illegal about low monthly payments or low (adjustable) interest rates as long as it is clear that these features are part of the loan.

Home loan offer and red flags

Some loan advertisements violate mortgage regulations because they are intentionally misleading. If you see any of these red flags, walk away from the business and don’t give out any private information.

Your first consideration is who sent the mail? It may mention the name of your current lender, but the mail may be from another company.

Beware of mail that uses the names and symbols of federal agencies – no one has an exclusive deal with the government. Also, watch out for mail that looks like an official government letter, like something you might receive from the IRS.

Beware of so-called “fixed” prices. “Ads that tout a ‘fixed’ rate may not tell you how long it will be ‘fixed’,” says the Federal Trade Commission.

8 things your mortgage lender should tell you

“The rate can be set for an introductory period only, and it can be as short as 30 days. When shopping for a mortgage, you need to know when and how your rate and payments may change.

If an offer is too good to be true – for example, 30-year fixed rates are now close to four percent, so if you see one at 2.5 percent – take a closer look.

Beware of low payment claims. If the sender says you can borrow $ 275,000 and only pay $ 1,000 per month, you must be wondering how this is possible in the current pricing environment.

What are the mortgage rates today?

Can you receive attractive mortgage offers in the mail? Yes, especially at today’s low rates. But you should consider each offer carefully, as you would any financing proposal. As the old expression goes, trust – but check.

And how do you know the deal is good? By comparing it with the offers of other lenders, it is easy to do here.

Check your new rate (November 26, 2021)

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