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The Benefits of a No Closing Cost Mortgage

One of the most common costs associated with a home purchase or refinance is the cost of closing the loan itself.  In many cases, this expense can account for a significant amount of money at the time of the purchase.  Though the down payment on a new home is often the largest single expense that must be paid at the time of closing, several other expenses fall under the category of closing costs.

For example, you may have to pay your mortgage broker a commission.  You'll likely need to pay an underwriting fee.  You'll also have to pay up for other related expenses, such as appraisals, inspections, and homeowner's insurance.  All of these costs must be paid at the time that you officially purchase the home and sign your name on the mortgage paperwork.

These collected costs can often run home buyers several thousand dollars or more.  If you're a first time home buyer, make sure you factor these expenses into your budget.  If you don't have money set aside to pay for these expenses, you should consider taking out a no closing cost mortgage loan.

In a no closing cost loan, your lender essentially allows you to skip paying the closing costs at the time of the home purchase.  Instead, you will receive a slightly higher rate on your loan than otherwise would have been offered.  This has positive and negative effects.  On the negative side, you won't be able to take advantage of the lowest mortgage rates available.  But if you know you're not going to be able to get an extremely loan rate on your loan for other reasons, such as a low credit score, and you plan to refinance your mortgage within the next few years, a no closing cost mortgage can help you get into a home that much sooner without forcing you to set aside thousands of dollars to pay for additional expenses.

This is one of the primary benefits of a no closing cost mortgage.  If you're short on funds but want to take advantage of good market conditions to purchase a home or refinance, your lender may be willing to waive the closing costs and get you into your new mortgage "free of charge" in exchange for a higher interest rate on the loan.  You'll have to weigh the costs and benefits for yourself and determine whether or not this financing option will acceptably meet your specific needs.  If so, contact a lender to get started working on your no closing cost mortgage today.

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