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Is there such a thing as a loan with zero closing costs? How do these work?

Looking to purchase a property for $225K and want to know how much I can expect to pay upfront? by Jenniferb.77976 from Leoma, Tennessee. Oct 7th 2015 Reply


Joseph Afonso (jafonso)
#65 ranked lender in Arizona - 195 contributions

All loans have some sort of closing costs the costs can be paid by someone other than you the buyer which would make it a no closing cost loan to you. A credit from the seller, lender, Realtor or a down payment / closing cost assistants program can be used.

Oct 7th 2015
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Sara Deere (SARAinMO)
#1 ranked lender in Kansas - 487 contributions

What was already submitted is correct. Also there are some cases where closing costs can be close to zero, but the rate might be a little higher or you maybe be having a little higher loan to roll in the closing costs. You might also consider a USDA loan, depending on where you plan to purchase the home.

Oct 7th 2015
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Jesse Stroup (jessestroup)
#195 ranked lender in California - 589 contributions

Everything cost money in this world. The "no cost closing" purchase or refinance loan is a marketing term; in my opinion. Here's what I mean. With purchasing or refinancing a loan there are processing, underwriting, appraisal, title, escrow, notary and recording fee's (maybe more). All of those fees have to be paid. Mortgage lenders can cover most or all of the closing costs by offering a lender credit. This credit is given by raising the interest rate higher then what you may qualify for, this produces back end margins that can be applied as a dollar amount to the loan. The higher you raise the interest rate, more money can be applied to the loan. The "bad" side to this is now your locked in with a higher interest rate for the term of the loan. This all comes down to Pro's and Con's. Jesse Stroup California Mortgage Professional www.CaliforniaHomeLoanLender.comwww.JesseStroup.comNMLS# 6229

Oct 8th 2015
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Joe Metzler (JoeMetzler)
#1 ranked lender in Minnesota - 3,446 contributions

There is NO SUCH THING as a loan with zero closing costs. All loans have closing costs (appraisal, credit report, title company, underwriting, state deed taxs, county recording fees, pro-rated property taxes, first years homeowners insurance, etc), and YOU will ALWAYS pay for them someway. You can pay cash out-of-pocket, you can roll it into the loan itself with "seller paid" closing costs, or you can accept a higher interest rate, which the lender will use to reduce your up-front closing costs today. Anyone claiming no, or low closing costs is simply hiding the costs in a higher interest rate. This isn't a good or bad thing. It simply depends on your situation, how long you are going to be in the home, and how the math works out. If you are looking for this type of options, consult with your loan officer about the math, and the benefits of all these options.

Oct 10th 2015
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