No Cost Mortgage Rates

We've all heard the the radio advertisements promoting "no cost rates" and most homeowners have wondered; is this really true? And how can blame them, no cost rates seem to good to be true. I'll break down what a no cost rate actually means, how different lenders have different definitions and why it's easier to obtain a no cost rate on a refinance.

What Is A No Cost Rate?

First lets be clear about the most important thing when it comes to no cost mortgage rates: no one is working for free. Everyone is still being compensated. Under a no cost rate loan program the lender is paying all the costs associated with the transactions (lender, third party and recording costs) or at least that's what's supposed to happen (I'll explain below).

So on your Loan Estimate, Closing Disclosure and final Settlement Statement you will still see costs listed but you should also see a lender credit to cover those costs.

Different Lenders Have Different Definitions:

As mentioned a no cost rate is where all (and I stress all) the costs associated with your loan are covered by a lender credit. However not all lenders see it that way. Some lenders think a no cost rate means that there are no discount points, others believe a no cost rate is one with out loan origination points and the list various definitions go on and on That's why it's important to ask these questions when you are looking into a no cost mortgage rate:

• What is the total cost of the loan; for everything - nothing left out?
• What is the total lender credit going towards covering closing cost?

Unfortunately you might have to ask that first question more than once; don't stop asking until you get the total number. And if someone is struggling to give you a straight answer it might be time to look for a new Loan Officer.

It's Easier With A Refinance:

It's true; a no cost mortgage rate is easier to obtain with a refinance than it is with a purchase. The reason why is that closing costs are higher with purchase transactions. The higher costs are not from the lender but from third parties such title and escrow. You'll also have a home inspection, and possibly a pest inspection which would are not needed when you refinance your a mortgage.

To be in the best position to obtain a no cost rate you'll need lock in a fixed rate mortgage with a loan amount above $250,000 and a loan to value ratio ratio below 60% (no cash out). Can other types of loan secure a no cost rate? Absolutely; the example is just to give you an idea of the easiest way to obtain a no cost mortgage rate.

JB Mortgage Capital, Inc.:

We work with clients throughout the state of California offering low rate mortgages for both purchase and refinance transactions. Loan Officer Kevin O'Connor has over 15 years of experience providing low rates, fast closings and personal service. Contact him today at 1-800-550-5538 for a no-cost/no-obligation quote.