Special offer

The Internet Has No Closing Costs?

By
Education & Training with REISA - 317-663-4173

So we spend some time together. I get to know about you and your financial goals for your home and your family. I go to work to find a great mortgage solution for these goals. Meet up with you and present everything in black and white with closing cost guarantees. Then..........

Whoa you say! I saw on TV a ad for no closing cost and your charging me $$$!

So what do I do now? I learned a long time ago that it is much easier to write' em vs fight' em. UH?

Again I am going to present to all of my Indiana clients the best mortgage program for their needs. Now while we may get a little side tracked on little stuff like closing cost I am not going to let this stand in the way of getting you a great deal so I write' em. Another thing I learned is to "seek to understand." So first I will agree with the client. It goes something like this:

"You know what, your right!  I have seen the same ads. In fact it sounded so good I had to check them out. My client, here is what I have found. For the most part two companies are advertising these programs, Bank of America and Countrywide. (In fact, Bank of America is in the process of buying Countrywide). So I went to their website's and this is what I have found:

Bank of America - Skip the Fees with No Fee Mortgage PLUS. Prequalify Online Today. 

Wow! Sounds great. I am now thinking that I need to go work for them but before I submitted my application I saw one of those funny little asterisks things* Hum, I said. Maybe I better check this out. Here is what I found

The following is a summary of the Terms and Conditions. A complete copy will be provided to you prior to closing.

1. No Fee Mortgage PLUS Terms & Conditions

The following is a summary of the Terms and Conditions. A complete copy will be provided to you prior to closing.

No Closing Fees

For customers who qualify, Bank of America will waive or pay all fees for services or products required by Bank of America in order to grant credit to the customer for the purchase of a primary residence. Fees do not include (and the Bank will not pay for): (1) taxes (including, but not limited to property taxes, recording taxes, document stamp taxes, intangible taxes or other similar taxes); (2) interest, including but not limited to prepaid interest or discount points; (3) fees related to owning the home and not directly related to the granting of credit, including but not limited to property insurance (e.g., flood insurance and hazard insurance), homeowner's association fees, special assessments and other similar fees; or (4) fees for products or services voluntarily chosen by the customer. Closing fees and closing costs differ. This offer also does not address any fees you may incur after the closing of the loan, such as late-payment fees, mortgage release fees or other fees associated with the servicing of the loan. This offer does not apply to any traditional fees paid by the seller. This offer is available on applications for certain first mortgages from individuals to Bank of America taken after April 21, 2007, to purchase a 1-4 unit owner-occupied family residence or second home. You must be an existing Bank of America customer. This offer is available only to the real property securing the mortgage. Offer not available through independent mortgage brokers approved to sell Bank of America Mortgage products. Offer is non-transferable and subject to change without notice. Only one application per household. Some restrictions may apply. Credit and collateral are subject to approval. Terms and conditions apply.

Close-On-Time Service Guarantee

To qualify for the Close-On-Time Service Guarantee, you will need to provide us with all the documentation required by Bank of America in the time frames established by Bank of America. You must lock your rate seven calendar days before the scheduled closing date. There can be no significant changes in your loan after your initial application. Bank of America will not be responsible for delays caused by you or any third parties that you select. Eligible claims are for loans that do not close by your requested closing date or within 25 calendar days from the day of your completed application, including property address if submitting under the BuyerReady® loan option, is submitted. The latter of the two dates will be used to determine the eligibility of the claim. You will need to call 800.497.0072 within 30 calendar days of closing on your loan to submit a claim under this guarantee. The equivalent of your first month's mortgage payment is principal and interest only. Any escrows such as taxes and insurance are not included. Other restrictions may apply. This offer can be withdrawn for new applications at any time. Your mortgage application must be accepted by your Bank of America loan officer while this offer is in effect.

Best Value Guarantee

In order to qualify for the Best Value Guarantee, you must receive full credit approval for the first lien purchase money mortgage with Bank of America. To redeem the $250, you must close your purchase mortgage with another lender, then call 800.870.3206 where you will be prompted to complete a brief survey. You'll be required to fax a copy of your HUD-1 settlement statement from your closing. Your loan with the other lender must be secured by the same property as the property you identified in your Bank of America application. You must close on your purchase loan within 60 calendar days after Bank of America sent you notice of the approval of your Bank of America mortgage. You will receive your $250 check via U.S. mail within 30 calendar days of our receipt of your HUD statement. We may report to the IRS the value of any premium, and any applicable taxes are the responsibility of the recipient.

2. Savings calculations based on 2007 Bankrate Study.

3. Assumes 1% origination fee. All fees are not charged by all lenders.

4. Disclosed savings are based on a loan amount of $200,000 with a 30-year fixed term, a 6.856% APR, 0.311 points, 360 monthly payments of $1,297.20, principal and interest only, 120 monthly payments of $130.00 mortgage insurance in years 1-10 and $33.33 mortgage insurance payments until LTV drops below 78% at 30% coverage, and a 95% LTV (rate as of 4/13/2007). Your benefits may differ depending upon loan amount and term and selections under the No Fee Mortgage PLUS program.

5. HUD Numbers and titles are listed as used by Bank of America. Number may vary by lender. Fees paid by Bank of America are outlined by title description and not title number.

Important note about this calculator:
Savings calculations based on 2007 Bankrate Study. Assumes 1% origination fee. All fees are not charged by all lenders.

Bank of America, N.A. Member FDIC. Equal Housing Lender © 2007 Bank of America Corporation. All rights reserved.

That is a bunch of fine print and still do not know what it takes to qualify? So maybe that is not the right choice. I guess Countrywide will have the better deal. Lets see:


Countrywide -

No Closing Cost++ Home Refinance Loan.
Call Today to Combine Mortgage and Debt.

FED CUTS RATE!
CALL OUR SPECIAL RATE HOTLINE:

1-800-291-XXXX (if you need you can look up on your own. I can't let you walk in to this insane program)

On the surface it sounds good, right? Sure No Closing Cost! What about those little ++ hanging around. Yep, more fine print. Here it is:

^ Countrywide Home Loans is a division of Countrywide Bank, FSB -- a member of the Countrywide® family: America's #1 home loan lender (as ranked for 2007 by Inside Mortgage Finance, Jan. 25, 2008, ©2008)

* As announced on March 18, 2008 by the Federal Reserve Board, FOMC meeting minutes, decrease of 0.75% to the Federal Funds Rate.

++ Affects pricing. With the No Closing Cost Option, borrowers finance the closing costs instead of paying for them at closing. Borrowers who pay closing costs at closing may qualify for a lower interest rate.  Some upfront fees (ex. credit report and appraisal) may apply and may be credited at closing. Call for details.

Not only is Countrywide charging you closing costs they are slapping you in the face and telling in the ad that it is no closing cost.

Folks, give your mortgage broker a break. If you have found a good one, congratulations. If not, call me. I will get you a mortgage for your needs and not my needs (read that again, it is the important one). While we all have to make money. That's how I provide for my family just in the same way you provide for your family we can do it with the best intentions of the client.


Thanks for reading my post and please comment. This issue seems to come up with most (and I use the term) customers. Heck I am also a customer with a mortgage and if a no closing cost was the right deal I would do it. It is not the right deal for most. As you see with "non-edited disclosures" when you get down to it even the "No-Cost" deals have cost.

At the end of the day it is advertising. Just like the car business, you advertise the "loss leader" that almost no one qualifies to get and sell what you have when they call or visit. No saying that I agree. Just saying what it is.

 

Let me know how I can help you get the best mortgage for your needs.

 

Respectfully

Tony Grego - Indiana Mortgage Company

 

 

 

Comments (27)

Stefanie Sexton
Unavailiable at this time - Lebanon, MO
Tony, Thanks so much for the great post!  As a Closing Agent, I have had to pull up this information or have the buyers Realtor do so, to explain why there are Lender, 3rd Party (credit rep's, appraisals, inspections), and our Title Company and Closing Fees.  As we hear all of the time, If it sounds to good to be true, than it probably is not!
Mar 25, 2008 12:19 PM
Tony Grego, 317-663-4173 #1 Trade Association for Alternative Inv
REISA - 317-663-4173 - Indianapolis, IN

No problem Jim. I figured since BOA and CW didn't someone had to do it.

Have a great day

Tony         

Mar 25, 2008 12:43 PM
Tony Grego, 317-663-4173 #1 Trade Association for Alternative Inv
REISA - 317-663-4173 - Indianapolis, IN

Thanks Stefanie!

 

The thing that seems the hardest for the client to understand is escrows and odd days interest. Since it is not something they can "put their hands on" (we all know the expense is there if they get a new mortgage or not). It is viewed as an expense when the charges are what they are currently paying. Crazy. Just with the price of taxes and insurance new escrow accounts do make up a pretty good bite

 

Good Luck

Tony         

Mar 25, 2008 12:47 PM
Kevin Corsa
H.I.S. Home Inspections (Summit, Stark Counties) - Canton, OH
H.I.S. Home Inspections, Stark & Summit County, OH Home Inspector

Very informative for those of us who are just unsuspecting victims of small type and disclaimers. There is always a catch (or three or four) isn't there?

 

Mar 26, 2008 11:23 PM
Stefanie Sexton
Unavailiable at this time - Lebanon, MO

The closest I have seen to no closing costs at the Closing Table is when a Customer is getting an Equity Line of Credit (right after first Deed of Trust).  On these, the lender will pay the few fees that there are associated with the loan; however, they usually inflate their fees on the First Deed of Trust to cover the expenses for the Equity Line.  

Mar 26, 2008 11:32 PM
Tony Grego, 317-663-4173 #1 Trade Association for Alternative Inv
REISA - 317-663-4173 - Indianapolis, IN

Agree Kevin,

The funny thing is when you point them out and the client still does not believe you. It is crazy at times

Thanks for your comment

Tony

Mar 27, 2008 01:01 AM
Tony Grego, 317-663-4173 #1 Trade Association for Alternative Inv
REISA - 317-663-4173 - Indianapolis, IN

Thanks Lil Bit!

Agree. I have seen lenders waive most fees with seconds or HELOC's. But they will still have some associated even with small loans

Tony

Mar 27, 2008 01:03 AM
Justin Poundstone
Regions Mortgage - Boca Raton, FL
Not sure what is worse; no closing cost claims or ridiculously low rate quotes. Had a client quoted 2 points off market. Now I can understand .125 to .375, but 200 basis points! I told the client to run to their office and lock the rate immediately. As you guessed, the following day the client was back at my office without a lock and finally ready to do real business.
Mar 27, 2008 12:32 PM
Jennifer Monroe
Indigo Home Team powered by Compass - Charlotte, NC
Real Estate REALTORĀ®/Broker/Designer
I love it! I'm so glad you posted this. I have a client right now that has been given a GFE that appears to have no closing costs either. We'll see...
Mar 27, 2008 01:12 PM
Tony Grego, 317-663-4173 #1 Trade Association for Alternative Inv
REISA - 317-663-4173 - Indianapolis, IN

Hey Justin!

Know what you mean. Whatever you say you lose. Just hope they don't get as far as the closing table were most sign.

Thanks

Tony

Mar 31, 2008 02:11 AM
Tony Grego, 317-663-4173 #1 Trade Association for Alternative Inv
REISA - 317-663-4173 - Indianapolis, IN

Thanks Jennifer

One day I hope my trade will get out of subprime thinking. Would help if the investor would not accept the application until complete. That is not going to happen either

Good luck

tony

Mar 31, 2008 02:13 AM
Christine Thierry
Sterling Home Mortgages - Narberth, PA
CRMS

5 stars!  You made the Mortgage Pro Week in Review!

Mar 31, 2008 05:02 AM
Tony Grego, 317-663-4173 #1 Trade Association for Alternative Inv
REISA - 317-663-4173 - Indianapolis, IN

Thanks Christine!

I'm very excited.

Tony

Mar 31, 2008 03:42 PM
Ruby A. Stover
Address Mortgage - Merrillville, IN
Certified Mortgage Planning Specialist
Fine print is a beautiful thing isn't it?  Very good post!  There is a commercial on my local tv every day that drives me insane.  It flashes this ridiculously low fixed rate and says "4.75% today only" and that flashes constantly on the screen where there is a fake reporter speaking about this "wonderful" company.  At the very end of the commercial it flashes in VERY small print "based on 10 year fixed only APR 6.276%" I only saw it because I saw it flash and ended up pausing it so that I could read what blinked quickly.  I was astounded but not very surprised at the bait and switch tactic right before my very eyes.  Though we are all professionals in this business you are right Tony we are all ultimately consumers and to me this sort of tactic smells of serious desperation.  It is a shame though that many are probably baited and switched and by the time they get to the closing table they feel stuck. 
Mar 31, 2008 11:33 PM
Eleanor Thorne
Equity Resources - Cary, NC
Advantage Lending 919-649-5058
Tony!  Nice post - congrats on make the Mortgage Pro Weekly!
Apr 01, 2008 03:19 AM
Tony Grego, 317-663-4173 #1 Trade Association for Alternative Inv
REISA - 317-663-4173 - Indianapolis, IN

Your right Ruby.

While plenty of blame can be cast for what is going on, advertising like this just shows the desperation by a national big name, bank to low ball.

Were is Congress on this one?

Tony

Apr 01, 2008 03:22 AM
Tony Grego, 317-663-4173 #1 Trade Association for Alternative Inv
REISA - 317-663-4173 - Indianapolis, IN

Thanks Eleanor for the comment and the notice on MPW

Have a great day

Tony

Apr 01, 2008 03:22 AM
Rebecca Schrader
Competitive Insurance of Dundee - Dundee, FL
There is a lender in Orlando that has "No Closing Costs" but the interest rate and YSP are high enough to pay for everything and a nice profit.  Consumers just like the gimmick "No Closing Costs".
Apr 09, 2008 06:26 AM
This Account No Longer Exists
Inactive Account - Woodstock, VA

they're just trying to get the phone to ring, it's just like buying furniture where that you have no payments for 12 months but in 12 months and 1 day your rate goes to 28% interest or advertiusing teaser heloc rates.

Apr 09, 2008 06:52 AM
Lew Corcoran
Better Living Real Estate, LLC - East Bridgewater, MA
Real Estate Agent, Home Stager, & Photographer
Nice post. Consumers don't realize that's there's no such thing as a "no closing cost loan." Even FHA streamline loans have costs - they're just not borne by the borrower. The bottom line is: the lower the rate, the higher the fees. And, of course, the higher the rate, the lower the fees. It all depends on what the borrower feels is in his best interest,
Apr 11, 2008 01:44 AM