No Closing Costs Mortgages vs Closing Costs

So, you are being sold on the No Closing Costs type of mortgage. Wow, this sounds great honey. Not only are we getting into the house that we truly want, but with hardly any money out of our pocket. This sounds too goo to be true. WAIT!!   Did you just say what I think you said?  Please repeat that. Okay says the client....  this sounds too good to be true.

So, I'll supply the shovel so you can dig your own hole? I have been in mortgage lending for over 14 years now. Every time business slows down, you see more lenders advertise these no closing cost loans. Has anyone ever noticed this?  Just recently Bank of America and Countrywide have advertised these types of loans. But they never mention the rates. Did you notice this?  They want you to call into their call center. It's called ADVERTISING. And it makes sense, right? This can be common sense once someone starts to explain the ins and outs of this type of mortgage. Tip: Ask for rate. Focus on RATE and PAYMENT, with costs.

So, why is my rate much higher than the closing costs loan? Because your higher rate is paying for your closing costs. This is simple math. But if you fall for it and don't ask the right questions. Or, if you get a loan officer that won't make you aware of this and or explain this to you, you could be digging your own grave?

Now, I am not saying that no closing cost loans are bad. It comes down to your goals. I always ask my clients their goals and if your lender doesn't do this in the first 10 to 15 minutes, this is a red flag. If you aren't going to be in the house for more than a year, then this might be a viable option. Better yet, this can be a great program for those investors that buy and flip homes. It depends on how long that you plan on keeping the house.

Tip:  Think twice in regards to what you see on television and or what you read in the paper. Make sure you speak with a professional loan officer that will explain many different financing options to you. Even if they are advertising just one type of loan. Remember, nothing in life is free. And if it sounds to good to be true, then it usually is.

Conclusion : There are standard costs when it comes to buying or refinancing a home no matter who says what. We all get the money from the same place. It doesn't matter how big the company is. We all can basically give you the same deals. You want someone that is going to give you great service. Be available when you have questions. Not someone that is hard to reach once they have your application.

Comments

[Callie Thompson]

Jeff- I love this Blog! The other day, I was at bank of America and noticed the No Closing Costs sign. I turned to my husband and said, "Look honey! A no closing cost loan!" Just then, the teller turned to me and says..." Would you like to talk to someone about this type of loan?" And I say, " No thank you Miss, I am your competition, I know exactly what is going on."

If it sounds too good to be true, it is to good to be true.

[Rich Schiffer]

Jeff, as always, you continue to provide the consumer with straight-shooting honest advice. Any REALTOR sending clients to you for their morgtages can rest easy knowing that the client is being treated honestly and fairly, and will get the right loan product for their needs.

[Jeff Belonger]

Callie... sorry for the delay in responding. I just think we need to educate the average consumer on this.

Funny that you mention Bank of America because I just say a commercial on this exact loan last night. 3 weeks ago it was called the no closing cost loan. Now they have a new name for it. It's called marketing. Thanks for stopping by.
JEFF

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Rich.....thanks for these kind words. My basic philosophy on this is treat others as you would want to be treated. This usually works for the most part. Thanks again.
JEFF

[Cindy]

This is completely not true.. we are currently looking at getting a mortage through bank of america - and have already been locked in at a 30/yr @ 5.25% interest with NO CLOSING COSTS. So how is that bad? That's probably the best rate out there right now!