Mortgage Advertising and the APR


Is the APR required to be the same size print as the advertised rate?


Technically, yes! The APR (Annual Percentage Rate) is, in fact required to be the same size print as the advertised rate. Although, this might depend on how many lawyers wanted to argue otherwise. Here is the exact wording from the Federal Truth In Lending Act (TILA), which you can find by clicking here: “The advertisement shall not state any other rate, except that a simple annual rate or periodic rate that is applied to an unpaid balance may be stated in conjunction with, but not more conspicuously than, the annual percentage rate. ”

I take this to mean that a different rate than the APR may be advertised, but it must not be more conspicuous than the APR. Your opinion may vary. There are a couple things to consider:

  • APR is not the actual NOTE RATE. For instance, if you are shopping for a mortgage, almost every mortgage provider is going to be quoting note rates, which are the actual rates applied to your principal balance. APR factors closing costs in with the interest to indicate the true cost of money over time. Here is a full discussion of APR. Bottom line, many consumers are not actually looking for the APR. They want to know the interest rate on their loan and the closing costs. Don’t forget, that APR is only as accurate as the mortgage broker that generated it. Even though the government requires it, it’s a much more accurate endeavor to get your note rate guaranteed combined with your closing costs and prepaid items/reserves.

  • Consider what constitutes an advertisement. If you see a television commercial advertising mortgage rates, that is fairly black and white. But if you are checking rates with a website, their published rates may not be an advertisement as much as they are an indication of what’s available. This gets into the whole debate of what constitutes an advertisement.

  • Consider whether or not you consider larger font to be “more conspicuous.” You may notice most lenders listing APR in fine, italicized print and referenced to the note rate with an asterisk. In this way, one could argue that the most conspicuous rate on the page had an asterisk next to it that referenced APR. So even though APR was in fine print, the asterisk proves that it was just as conspicuous as the note rate.

Whatever advertisement you are looking at, make sure you understand the terms completely before believing something that seems too good to be true. Many lenders are advertising rates of 4.5% and lower, when in fact the true cost of your money on such programs is closer to 7%. Make sure you understand Note Rate, closing costs, and prepaid items/reserves.

If any part of this answer was unclear, or would benefit from additional information, please email me so I can update it.

Answered over 9 years ago
Matthew Graham
986 6
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