I receive many requests for a "No Cost" loan. Sadly there is no such thing.

All loans have costs associated with putting the loan together and getting to escrow. Just like you, participants in the mortgage process don't work for free. The appraiser, Title officer, Title Insurance Company as well as your lender all need to get paid as part of the process. The real question is: How do I get a loan so I don't have to pay for these required services? The simple answer is you can't. What you can do is determine how they get paid.

Let's say you're looking for a loan to buy a new home. All of the costs associated with your side of the transaction, are paid in one of three ways: By you, in cash; By the Seller, in the form of a credit used to pay your closing costs; By the Lender in the form of a credit to pay your closing costs. Now you may be saying "Wooh-Hooh, let the lender pay", but you need to know how the lender can do this, and why it may not be such a smart move.

If you and the lender agree, by accepting an interest rate that is higher than what is considered a "Market Rate", the lender receives more cash than just the face amount of the note when they sell it to an investor on the secondary market. This excess cash is what the lender uses to pay some or all of your closing costs. This means that over the life of the loan, you will be paying more interest to the lender than you otherwise could have.

Does this strategy make sense for you? Maybe. It depends on several factors. How much higher is the rate and what is the monthly cost to you in increased payment? How long do you plan to stay in this loan? Do I have the cash to pay the costs out of pocket? This is where it becomes important to work with a Licensed Mortgage Originator and not a bank employee. As I have said many times, A Mortgage Banker/Broker is Trained, Tested and Licensed in all aspects of Mortgage Origination. A bank employee is usually just registered and not licensed.

A local Mortgage Banker/Broker will take the time to show you the pros and cons of each method so you can choose which way to go.

Finally, Make sure you check out your selected Mortgage Originator at the National Mortgage Licensing System at www.NMLSConsumerAccess.org ~ Bert Carpenter, The LoansA2z team of NOVA Home Loans ~ NMLS 40586 ~ www.LoansA2z.com