|
There's no magic involved in obtaining a home loan without closing costs. With a no closing cost mortgage (aka "no points, no fees"), the mortgage lender or broker simply charges a higher interest rate up front then uses the cash resulting from the projected increase in profitability of the loan (yield spread premum) to pay closing costs.
A zero closing cost loan can come in handy if you do not have enough equity to pay closing costs or if you expect to hold on to the mortgage for only a couple of years. If you are getting a 30-year fixed mortgage and you have sufficient equity, you should expect to pay some closing costs in order to keep the interest rate and total lifetime loan costs reasonable. FYI, you should NOT consider a 30-year fixed loan unless you expect to keep the mortgage for seven years or longer.
If you are purchasing a home, another way of reducing your out-of-pocket expenses for closing costs would be through seller contributions towards closing costs. Many lenders will permit the seller to pay up to 6% of the purchase price to cover most (or all) of the buyer's closing costs. Typically, the seller may only pay for non-recurring closing costs (NRCC). NRCCs include points and fees for services such as appraisal, credit reports, title insurance, recording, tax service contract, flood certification, and any other item that does not recur from month-to-month or from year-to-year. Several nonprime lenders will also permit seller contributions towards recuring closing costs such as property taxes and homeowners insurance.
These are a few ways to keep your out-of-pocket costs to a minimum.
Call today to learn more about these and other options... (888) 337-9944
|
