How are No Closing Cost mortgages possible?

How are No Closing Cost mortgages possible?

No closing cost mortgages sound great! Who would not prefer to avoid paying the $2,000 or more it costs to sign for a mortgage, or “close the loan” as the mortgage lingo goes? So why do we even have loans that require the borrower to pay closing costs?

No Closing Cost Mortgages an Advertising Gimmick?
No closing cost mortgages are possible because you pay for them. Yes, it’s true and don’t be misled! You either pay the costs to close when you sign for your home loan or pay a slightly higher rate and pay the costs to close over time. How much higher? Well, it depends on how much you are borrowing and your personal financial picture. We only recommend this option for clients who need a short-term loan. That’s because a higher rate, even a slightly higher rate, can add up over the life of a home loan. Make sure when you compare rates that you are also comparing the costs to close.

Should I Read More?
If you know what “no closing costs” means and you’re looking for a rate quote, you can call us. We’re available after hours and weekends, too, and we offer no closing cost mortgages!

Or email info@carolinahomemortgage.com.

You can also go to our Instant Rate Quote Calculator which will show a low or no closing cost option. Otherwise, read more.

No Cost Closings: Too Good To Be True

You see it all over the internet, “No Closing Cost Mortgages.” It sounds too good to be true. How can a lender pay $2,000 or more in closing costs on my behalf? If you believe there are no free lunches, you are right! When you borrow the money for a home loan, you cover the costs to close. You can check it with the Consumer Finance Protection Bureau.

When We Recommend It. A no closing cost mortgage may be a good option for you in the following situations:

  • If you are tight on cash to close.
  • If you are planning to stay in the home less than four years.

Just What Are the Costs to Close?

Costs to close a loan include the loan officer’s time, the fee to appraise the home, a title search on the home, and credit report fees.

  • Loan Officer Fees. A loan officer will spend many hours securing your loan.
  • Attorney Fees. In North Carolina, you choose the attorney to prepare the legal documents for you to sign or “close your loan.”
  • Title Search Fees and Insurance.  Your attorney will do a title search to make sure there are no legal issues with the “title to” or ownership of your home and also no tax liens or judgments against the sale of the home. The attorney will obtain title insurance to protect you and the lender on any title risks. There is a one-time charge for title insurance which you will pay at closing.
  • Home Inspection Fees. A board-certified expert will inspect the condition of the home and give you a home inspection report, This report is used to negotiate any needed repairs with the seller.
  • Appraisal Fees. A board-certified appraiser will do an appraisal on the house to determine its fair market value.
  • Credit Agency Fees. A charge for one or more credit reports is part of the costs.

And the Bottom Line?
Here in North Carolina, count on financing or paying $1,500 to $3,000 depending on the amount you borrow for your closing.

  1. Compare. We always advise friends, family, and clients to get at least two quotes from mortgage lenders so you can compare their closing costs – as well as their interest rates.
  2. Good Faith Estimate. You’ll find the costs to close on your “Good Faith Estimate.” Federal law requires mortgage lenders to provide loan applicants with a Good Faith Estimate (GFE) of the closing costs within three days of submitting an application. The GFE is your lender’s estimate of the fees they’ll charge for preparing your loan. The fees that come from the lender cannot change and are binding. Other fees can vary up to a total of 10 percent.
  3. HUD-1. The document that shows your actual costs to close is called a Settlement Statement or HUD-1. Federal law requires mortgage lenders to provide loan applicants with a HUD-1 Settlement Statement of the closing costs at least one day prior to signing for, or closing, the loan. The HUD-1, which you sign at closing, should not vary from the initial GFE unless there has been a “change of circumstance” that altered the interest rate or closing costs. For example, your appraisal could come in lower than expected and change your lender fees slightly. If there is a change of circumstance you should be provided a new GFE and told why. Page three of the settlement statement compares the GFE estimated closing costs side by side with the actual fees.
  4. Referrals. Ask for recommendations from friends and family for a good loan officer or mortgage broker

Why Work With Us?
Carolina Home Mortgage is local and an independent small business. You’ll find our rates are low if you do the comparison. For 15 years we have helped clients become our neighbors. You don’t get to do that unless you offer quality and client-centered service.

Email your questions to
info@carolinahomemortgage.com
or call us. At the end of the day, we report to you, not the bank. We are available after hours and weekends, too!

Helping You Make Carolina Home!