No Closing Costs vs No Out Of Pocket Closing Costs is a post from: Arizona Mortgage Team

Closing costs.

Due to some very slick marketing by the mortgage industry, many people know that “closing costs are bad” and that they don’t want to pay them. They aren’t exactly who is going to pay them, but they know that they don’t want to.

Here is an ad that I came across from Countrywide.

Does this add say “no closing costs”?

No.

It says “No Cash Required For Closing Costs.” – or in other words – there are closing costs and you are going to pay them, but they can be rolled in to your loan.

Hence the term “no out of pocket closing costs”.

The interchangability of the two terms can be confusing, I realize this. But I just thought I would go on record as saying:

You can pay your closing costs or the seller can pay your closing costs. If you want the lender to pay your closing costs, be ready for a higher than market rate – because in exchange for paying your closing costs, the lender will require a higher interest rate.

Oh, and I rarely if ever see people bringing money for closing costs on a refinance – they are almost always rolled into the loan.

Is it better to pay your closing costs and have the rolled into your loan or is it better to get the bank to pay your closing costs for you in exchange for a higher interest rate?

It depends.

Make sure that when you speak with a loan officer about your situation, you ask them that question.

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FHA Streamline Refinancing: How To Get A “Free” Mortgage is a post from: Arizona Mortgage Team

Question:

How do you get a “free” mortgage?

Answer:

You really don’t. Title companies get paid, lenders get paid, appraisers get paid, the government recording offices get paid, credit reporting companies get paid… it is just a matter of who pays them – you or “the bank”.

Here is how to get the closest thing to a free mortgage that I can think of…

How to get the bank to pay your closing costs

Many times I speak with people who want a “no out of pocket closing costs mortgage”. Note – there is a difference between a “no out of pocket closing costs mortgage” and a “no closing costs mortgage”. The difference simply is that with one, you roll all of the costs into your new mortgage (you will pay the costs, just over the term of your mortgage) and with the other you get the bank to “pay” your closing costs.

Why will the bank pay your closing costs?

They will pay your closing costs in exchange for a slightly higher interest rate.

Put simply, the situation may look like something like this: If you are willing to pay your closing costs and have them rolled into your loan, the rate on your mortgage may be 5%. OR. If you don’t want to pay your closing costs and have the bank “pay” your closing costs – your interest rate might be 5.5%.

A subtle but important difference.

There really isn’t such a thing as a “no closing cost” mortgage – it is just a matter of who pays the closing costs — you or the bank. And if the bank pays them? Expect your interest rate to be higher than it would be if you paid them.

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• No Closing Costs vs No Out Of Pocket Closing Costs
• FHA Streamline Refinancing: Is A Local Arizona Loan Officer Better?