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No closing cost 0 pt 0 fee loan

Does no closing cost mean 0 pt 0 fee? Also, there are 3 fees on our payoff for our old loan. Is my broker supposed to pick up those under a no closing cost 0 pt 0 fee loan? by susan._511_123 from Valencia, California. Nov 30th 2012 Reply


William J Acres (William_Acres)
#73 ranked lender in Arizona - 8,728 contributions

When your broker says he will do a no cost loan.. What he means is that he will not charge you to do the loan as far as cash up front or added to your loan.. You are paying him, otherwise, why would he do it.. so he charges a slightly higher interest rate, and get's his compensation from the lender rather than you.. But make no mistake it's not free, and you are paying for it in the form of a higher interest rate.. In this scenario, if he is not adding anything to your loan, then he has fulfilled his promise. If you look at your payoff, and look at your new loan amount, and if the number is the same, and you're not coming out of pocket, then it's a no closing cost loan.. as far as the added costs to your payoff.. No, these are never part of his offer.. those fees can be very small or rather large, and there's no way for him to know.... I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

Nov 30th 2012
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Bert Carpenter (BertCarpenter)
#1 ranked lender in Arizona - 2,395 contributions

There is no free lunch. There is no such thing as a "No-Cost loan", because no one works for free. The title company expects to be paid, and the broker has to make a living too. Oh, and don't forget the money needed to establish your impound account for taxes and insurance. You really don't expect the Broker to pay for that too, do you? The question is how are these costs going to get paid, and trust me, YOU are the one that is going to pay them. Your options are simple... Add it to the principal balance of the new loan, Bring cash to escrow, or pay it to the lender over the life of the loan by accepting a higher rate. What most people consider to be a "no cost loan" will actually cost them way more in extra interest, then if they had simply added the costs to the principal. To know for sure how much extra you are paying, take this simple test. Have your broker disclose both options to you. Take the difference between the two principal and interest payments and divide that number into the total costs being charged on the loan with the costs added to principal. If for example, the difference in the payment is $122, and the costs are $4,100, divide $122 into $4,100 and the answer is the number of months it will take you to fully pay the costs back to the lender. In the example above, the answer is 33.6. This means that after 34 months you have paid for the closing costs. But after 68 months, you will have paid them a second time. After 15 years in this loan, you will have paid the closing costs over 5 times. No matter how you slice it, that is no deal. By the way, any charges your current lender may assess are not fees of the transaction and NO, your broker would likely never pay for them as they are considered part of your payoff. ~ Bert Carpenter, The LoansA2z team of NOVA Home Loans ~ NMLS 40586 ~ Licensed in California and Arizona ~ www.LoansA2z.com 888-889-9950

Nov 30th 2012
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Bruce Conn (BruceConn)
#278 ranked lender in California - 19 contributions

The payoff fees are your obligation. A quick editorial: "0 points, 0 fees" is rarely the best option. It is marketing cosmetics creating the imagery of "Free!" Not so - somebody has to pay the title company, escrow, county recorder, etc, etc, etc. If the lender (via a broker) is paying these costs for you then it is, in essence, a loan to you. Do lenders loan money for free? Not a chance. You will be paying with an increased interest rate - for the entire life of the loan. What are your options? 1) you pay the costs in cash, 2) the balance on your new loan is increased by the amount of the costs, or 3) the amount of cash you receive in a cash-out loan is reduced by the amount of the costs. Ask your broker to give you the rate and costs if you pay for ALL the closing costs. Then calculate the savings you will get with the interest rate, determine how many years and months of those savings will be needed to offset the costs you paid, and that final month is your break even point. From that point on, you are ahead with the lower interest. Hope this made sense, Thanks for listening. Bruce Conn, (800) 696-0696.

Nov 30th 2012
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Phil Dumouchel (PhilDu)
#32 ranked lender in South Carolina - 2,249 contributions

I don't necessarily agree with Bruce that 0 points 0 fee loan isn't usually the best option. I often promote that to my customers for a refinance, why pay lots of money (whether you pay it in cash or add it to your loan amount) for a lower rate if the difference in your monthly payment is minimal. Especially with house values down significantly for many if not most refinace situations I think a minimal cost loan is the best option, it doesn't cost you anything to do and you start saving on the payment immediately. It's always worth asking what the options are, don't necessarily take what is offered. There are lots of different ways of looking at this.

Nov 30th 2012
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Phil Dumouchel (PhilDu)
#32 ranked lender in South Carolina - 2,249 contributions

PS. Any fee other than the lender or title/attorney costs are not the responsibility of the lender other than to make sure there is enough money in the loan or that you are willing to bring to closing to cover it.

Nov 30th 2012
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Larry Gray (lgray_312_247)
#597 ranked lender in California - 1,139 contributions

That is an excellent question! There are enough varying costs on any mortgage to become down right confusing! This ismost particularly true of a home purchase loan. The new vast and complex Fed. Act overseeing mortgage originationand brokering has set up the good faith estimate to show any cost they deem a cost, a cost! So even if it is interestthat is due from you towards the loan...that is a cost. If it is tax and insurance impounds...that is a cost.Most lenders when they say no closing cost loan are referring to those traditional closing costs that are charges forservices render in the loan process (i.e. Processing, Underwriting, Admin., escrow services, title insurance, signingand recording fee, doc. prep. fee, delivery costs, credit report and flood insurance.) Outside of those traditional closing fees and perhaps the appraisal...nothing else is included in the vast majority of lender's "no closing costs"loans. Sometimes on an FHA loan those costs you pay during the life of the loan (interest, property tax & insurance)can also get covered by seller, lender, and realtor credit in a purchase.

Dec 1st 2012
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