No Closing Cost Home Loans
- Borrower Pays Zero points, 0 Points, or Fees.
- No Fees for Non-recurring Closing Costs
- Fees are NOT added into the Loan. **
No closing cost refinance home loans are among the best methods for a homeowner to lower their monthly expenses when they refinance their property. By applying for a zero cost / no points mortgage loan, lenders are responsible for paying all of the closing costs!
The fees actaully don't go away altogether. It has to be paid by someone. In this case, the lender or mortgage broker takes care of it most likely by offering the borrower a higher interest rate than a loan where the closing costs are the borrower's responsibilty. The benefit to the borrower is they preserve their savings to the tune of $3,000 to $12,000 which would typically be their closing expenses (based on a $300 - $500k loan).
More importantly, as a result of there not being any fees placed into your home refinancing transaction, the lender will likely offer to refinance your interest rate again, if indeed, the financial market long-term bond rates trend in your favor! That's correct, each time interest rates drop lower, you may be able to decrease your rate again with out any fees, even if rates just go down slightly. In certain situations, federal lending guidelines ask that borrowers wait 6 months to one year.
WHO MAY BE ELIGIBILE?
Loan amount - $300,000 or more
States: CA, CO, FL, TX
Credit Score: 660 FICO minimum (640 for FHA)
Equity: 20% minimum equity is required
W2 or 1099 (employed or self-employed)
Documentation: 2 Years Full Income and Tax Documents
Occupancy: Primary Residences only
Property Types: SFR/Condo/PUD, 2-to-4 units
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** The interest rate may be higher than a loan with fees paid by borrower.
A no cost refinance is basically a loan transaction in which the lender or broker pays the settlement costs, including typical non-recurring closing fees such as processing, appraisal fee, expenses for underwriting, title/escrow fees, points on loan origination, and so forth.
How to Reduce Closing Costs on a Purchase Loan
There are two methods where the buyer doesn't need to pay for any closing costs at closing or they are reduced significantly.
Basically, during the negotiating of buying the house from the seller, the buyer will request the seller to credit or pay "x" amount of dollars or a percentage of the purchase price towards closing costs.
Example: John & Carla, the buyers, are offering to buy Jim's $400,000 home and ask Jim to pay 3% of sales price towards closing costs. Jim agrees and will credit John & Carla, the buyers, $12,000 towards closing costs. This amount should take care of all closing costs and still have enough left over for John to pay for a lower interest rate. Keep in mind, sellers do not always agree to this as $12,000 is a lot of money. Anywhere from $3,000-$10,000 is more customary.
Another way to reduce closing costs is by asking the lender which rates will give him/her a lender credit to pay for some or most of the closing costs. This happens frequently with FHA loans and the buyers are very pleased with the end result as they get a very competiive interest rate and little to no closing costs.