Lender paid closing cost (insurance, mortgage, refinance)

[Sergio M]

Great programs out there now where the lender pays the closing cost. Or, you can get a mortgage with no mortgage insurance. These programs geared to help sell more homes. Excellent benefit to both buyer and seller.

[imoapie]

Is the closing cost effectively rolled into the rate tho?

[Sergio M]

No, the closing cost is paid by the lender. They will not pay prepaid escrow. They will allow you to buy with $500.00 down.

[sonofagunk]

Sounds like a horrible idea to trick people into buying something they cannot afford. Hey, but as long as their is a commission, right?

[davenj08]

Does the lender increase the mortgage rate by 1/8th or a quarter to recap the closing cost? How does it work? Nothing is free for sure, so what's the trick?

[Sergio M]

Interest rates do vary from lender to lender, so if it's an 1/8 more or less, the benefit here to the seller is that they get their house sold, and the buyer gets to buy it without paying the closing cost. If you need more info, you can DM me.

As with any mortgage, you really need to read the fine print. This is not a trick, you just need to make sure you understand what you are getting into.

[NYCresident2014]

Use Zillow Mortgage and you'll understand. The lender-paid closing cost mortgages are in fact 1/8th higher than the lowest rate you can get. It's totally worth it, in my opinion- the payoff works out to be somewhere around 11 years. Most people aren't going to have the same mortgage in 11 years.

When I bought my house, I took a rate that was 2/8 higher and they paid me $7k on top of the closing costs. It covered the lawyer and the balance went into my escrow (they basically pre-paid some of my property taxes). Here's the kicker- 6 months later, my broker refinanced me at market+1/8 for free. For illustration, I took 4.25% when the market was 4.0%, and refinanced at 3.75% when the market was 3.625% (a couple months ago).