No closing cost loans are usually requested by borrowers with few money to bring to closing. The phrase is a bit misleading as there are always closing costs. The method those expenses are recouped by a lender may be structured in different ways. Below is an explanation of MA no closing cost loans, a few important facts, and how it compares to options with closing costs.
What Are No Closing Cost Loans
Closing costs apply to every loan because mortgage companies have expenses related to issuing loans, paying brokers, etc. In a traditional mortgage, the specific fees are billed and listed as closing costs. However, not all home buyers have the money to cover these fees up-front. No closing cost loans were developed to address this problem.
There are two primary ways that lenders can offer no closing cost loans. The first is to apply a higher interest rate, which allows them to recoup the closing costs gradually. The other is to add the closing fees into the amount of the mortgage.
Benefits And Risks
Deciding whether to use no closing cost loans can depend on a few factors. If you plan to pay off your mortgage in a short period of time, then it may be a good option since you would be paying the larger interest rate for a short period of time. This can be true when interest rates are high but are expected to decrease in the future or if you expect to sell your home in a few years. Alternatively, if you plan to hold a loan for the long term, then the expense of a higher interest rate over the years will be much more than merely paying the closing costs now.
It is important to mention that the lack of closing costs does NOT mean that cash is not be due at closing. Closing costs really only refer to only some charges. Other amounts due, like escrows, fall under the classification pre-paid items. They are not classified as closing costs and will therefore still be required at closing.
MA No Closing Cost Loans
MA no closing cost loans may or may not be the optimal option for your particular situation. To make an educated decision on what financing program will work best for you, compare both the interest rate and fees of each option. Also analyze how many years you intend to have the mortgage and the the long-term impact. All of this data can be reviewed by requesting a good faith estimate from your lender. For further information contact Christopher Graves at Emery Federal Credit Union via phone at 781-759-1200 x22 or email firstname.lastname@example.org.