Early this year there were drastic changes to the mortgage industry regarding interest rates and credit received for them. Here's a brief summary of how it works now.
A borrower has two options to pay the fee of the mortgage broker and/or lender.
Option 1: Upfront when the loan closes. This can be paid by check, seller contributions, or by increasing the loan amount to cover the fees in the case of a refinance. Select this option to minimize the interest rate.
Options 2: Over time, through a higher interest rate. The lender will provide a credit at closing that will cover the entire fee. Select this options to minimize upfront fees.
So let's say the mortgage broker and/or lender fee is $3,000 for the loan. The borrower can go with Option 1 and pay it directly out of pocket or with seller contributions at closing. Option 2 would allow the borrower to select a slightly higher interest rate, pay the $3,000 over time through the higher interest rate, and not have to bring it to the table at closing. The borrower also has the ability to further increase the interest rate to get additional credit to cover closing costs beyond the $3,000 mortgage broker and/or lender fee.
To summarize, if your borrower doesn't have the money for closing costs, and the seller wont contribute towards them, they now have another way to go. Contact your local mortgage broker or lender for further details on how this works. Have a good day!