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I am looking at a 265K short sale....advertised as an "easy short sale, attorney approved". Anyhow, I have the 3% down I need for an FHA loan, but no money for closing costs. Are there loans/companies out there that can provide me with a zero closing cost loan ? If not, what are the typical closing costs ?
There are two ways to get to closing with $0 in closing costs from yourself.
1) Get the seller to pay for them. FHA allows the seller to contribute up to 6% of the sales price towards the buyers closing costs. On a $265,000 purchase this should be ~2x that required. It is only on small loans (<$100,000) where the 6% rule becomes an issue. Often the seller will not negotiate as much on price if they agree to this... but it all depends on the seller and how much they want to net.
2) Have the lender pay your closing cost. The lender can pay all of your closing costs, but of course there is no free lunch. In order to get a "no closing cost" loan, the lender will increase your interest rate. The broker or bank will then use the additional compensation they receive to pay off your closing costs.
Both of these are valid options but be aware they both come with a cost. In one you will usually have a higher purchase price (more debt) in the other a higher interest rate (higher monthly payment). They are useful ways to buy a home with limited cash, but always take the pros and cons into account.
With a short sale good luck getting the seller (the bank) to pay for them.
Bank of America has a no closing cost mortgage.
I have had short sales were the seller did... it all comes down to your offer and their net. If the seller wanted to net $250k and you offered:
A) $250k with $0 in closing costs
B) $255k with $5k in closing costs
Its the same to the seller, $250k. Yes it is harder to negotiate with a short sale in some cases because you have to show the lender that your net offer is better than potential recovery after a foreclosure. A good Realtor who has experience with short sales can advise you on how to make these offers.
EVERY lender has a no closing cost mortgage... its the same thing, higher interest rate = lower (or no) upfront costs. Even in BOA's "no closing cost" mortgage is not a true "no closing cost" mortgage.... they make you pay for some escrow and other items. The bottom line is you can go to any lender that does FHA and tell them your situation, they can offer you options.
Even in BOA's "no closing cost" mortgage is not a true "no closing cost" mortgage.... they make you pay for some escrow and other items.
BofA's is not a "no closing cost" mortgage; it's a "no closing fees" mortgage. The average borrower probably wouldn't know the difference, but it is there if you read the fine print.
BofA's is not a "no closing cost" mortgage; it's a "no closing fees" mortgage. The average borrower probably wouldn't know the difference, but it is there if you read the fine print.
Correct, and bank of america is now phrasing it as such... as "no closing cost" ended up getting a lot of companies into legal issues. It is a "no closing fee" mortgage in the way they choose to describe it.... but as with anything the fine print is important.
You are right that the average borrower does not know the difference, and they are often misled by advertising and loan officers whose purpose is to sell a product. As with anything else there is a cost involved and consumers need to be aware of that. Much as Option ARMs and other adjustable rate products had all the terms disclosed in the fine print, but very few borrowers took the time to read it.
Read the fine print with BoA. Even better, start questioning them on it & wait until you get some of the responses....
As a relative who is in the business told us when we were researching BofA, no bank/mortgage company is every going to give you free anything. They need to make money.
Talk to your lender who is doing the FHA b/c there are options as others have mentioned.
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