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I was reading online tips on 1st time homebuyers and there was a mention of no closing cost mortgages and how big lenders (like Bank of Am) can offer this.
Does anyone have any experience with this? I'm meeting my mortgage broker today and want to suggest this. I'm purchasing a townhome in Northern NJ
I was reading online tips on 1st time homebuyers and there was a mention of no closing cost mortgages and how big lenders (like Bank of Am) can offer this.
Does anyone have any experience with this? I'm meeting my mortgage broker today and want to suggest this. I'm purchasing a townhome in Northern NJ
Any lender can offer this. They charge a higher rate and use the yield spread to pay the costs and their profit.
To elaborate on the truth that Tim speaks: A "no closing cost" loan of ANY KIND is almost always a BAD DEAL that costs you MUCH MORE than paying for the costs out of pocket / up front.
The lender wraps all those costs into the loan so that you end with a HIGHER RATE and typically that means your "break even point" is much further out in the future.
The current situation with many home owners have NO EQUITY in their home would be a HUGE reason to avoid overpaying for a loan!
To elaborate on the truth that Tim speaks: A "no closing cost" loan of ANY KIND is almost always a BAD DEAL that costs you MUCH MORE than paying for the costs out of pocket / up front.
The lender wraps all those costs into the loan so that you end with a HIGHER RATE and typically that means your "break even point" is much further out in the future.
The current situation with many home owners have NO EQUITY in their home would be a HUGE reason to avoid overpaying for a loan!
Thanks for clarifying, now it doesn't sound like such a good thing to do. I was just in sticker shock when I found out approx. how much closing costs would be, then realizing that sellers don't pay for it (something I thought was true from watching those real estate shows on HGTV LOL)
I'd rather have less money for furniture than a higher rate loan.
brandy76, if you plan on keeping your home less than 3 years a no cost or low cost loan is better even though the rate is higher. If you are planning on keeping the home for longer, than pay the costs and one point to get a lower rate.
Getting an interest rate is like buying anything else. A better attorney costs more, a better car costs more and a better mortgage rate costs more.
I was reading online tips on 1st time homebuyers and there was a mention of no closing cost mortgages and how big lenders (like Bank of Am) can offer this.
Does anyone have any experience with this? I'm meeting my mortgage broker today and want to suggest this. I'm purchasing a townhome in Northern NJ
Brandy,
If you go for no closing costs, then around $4000 (assuming it is closing cost fr 300k loan) will be included in your mortgage. You need to pay interest on this. Also you gonna pay more interest in the first few years , there by adding no value to your home equity. This is really a bad option. No closing cost option is good when home prices are going up , because you can sell for profit and you can save money by not paying closing cost.In this market it is good not going for no closing cost and higher interest rate loan.
If you go for no closing costs, then around $4000 (assuming it is closing cost fr 300k loan) will be included in your mortgage. You need to pay interest on this. Also you gonna pay more interest in the first few years , there by adding no value to your home equity. This is really a bad option. No closing cost option is good when home prices are going up , because you can sell for profit and you can save money by not paying closing cost.In this market it is good not going for no closing cost and higher interest rate loan.
My closing costs will be approx. $10-12K since it's a townhome, just found this great news out from the real estate attorney. My loan amount is $312K
Brandy, i doubt your closing costs are that high. You are probably adding your prepaid items to the closing costs. Prepaid items are your hoa fees and property taxes. Look at the gfe that your lender provided, only add the 800 lines and the 1100 and 1200 lines. Those represent the true closing costs. The 1000 lines are your prepaid items which are not a closing costs and will be the same no matter who you use for financing.
My closing costs will be approx. $10-12K since it's a townhome, just found this great news out from the real estate attorney. My loan amount is $312K
Brandy , Are you paying any points?
on $10000 closing costs, 5% interest you would be paying $500 extra a year . $1000 for 2 yrs, $1500 for 3 yrs $2000 for 4 years..So it is wise you go for no closing cost loan if you r planing to reside only for few years less than 5 years.
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