The late Milton Friedman popularized the expression "There's no such thing as a free lunch". By listening to some very popular radio ads by an Atlanta mortgage company you would think that anyone who willingly pays closing costs for a mortgage is either an idoit or is being ripped off. This guy doesn't charge any closing costs. His mortgages are "free". That guy has to be making a lot of money to pay for all those radio ads. So where does he make money if he doesn't charge closing costs?
Instead of charging closing costs to fund his company, he sells mortgages with higher interest rates that banks will pay a premium for. It's nothing special that no one else can do. Ask any loan officer to quote you a no closing cost mortgage. They all can.
The question you have to ask is which scenario is most beneficial to you. If you are going to stay in your home for less than three years then usually a no closing cost loan is better. You'll pay extra every month because of the higher interest rate but it will take about 3 years for those higher payments to add up to the savings in closing costs.
If you plan on staying in your home for over 3 years then it's usually better to pay closing costs up front in exchange for a lower interest rate over the life of the loan.
Closing costs aren't a rip off. The rip off is a lender that only tells you part of the story to make you feel that you are getting a great bargain when in fact it might really be something that will cost you a lot over time.
I sell a lot of Atlanta real estate and have dealt with a lot of mortgage companies. My advice would be to seek a loan officer that will give you some straight advice on what all your options are so that you can pick the one that's right for your situation.
Tim Maitski
Atlanta Real Estate Agent
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