Should You Consider A No Closing Cost Mortgage Loan?

Let’s face it, purchasing a home can be expensive and for those who are first time homeowners, cutting down on expenses and saving to purchase a home can be a big deal. However, they are often shocked to find out that at the time of the purchase, they not only have to put down a down payment for the home but also have to pay up in closing costs. This cost can actually add up to additional thousands of dollars in cash that you need to pay upfront. Homeowners have the option to either pay upfront or go for a no closing cost mortgage loan.

Is A No Closing Cost Mortgage Loan Suitable For You?

That’s a question that really depends on you and your needs – whether you want to pay the amount up front or would you rather pay overtime and use that money on other necessities? Would you rather go for a minimum amount upfront or prefer a lower monthly interest rate and monthly payments instead?

Of course, when you decide to go with a no closing cost mortgage loan, it doesn’t really provide you with a free pass – nope, just like nothing in life is free, your no closing cost mortgage loan also comes at a price and that is in the form of higher monthly mortgage payments. 

Let’s take a closer look at how a no closing cost mortgage loan really works through an example:  Although closing costs vary from region to region, the general range is between 2-3% - which means that if your loan amount is of around $150,000 and your closing costs come to around 2.5%, then the total cost of closing that you will have to pay would be $3750. 

These closing costs may or may not include the following:

·         Appraisal fee

·         Application fee

·         Flood certification

·         Recording fees

·         Attorney fees

·         Survey

·         Home inspection

·         County/state/municipal taxes

·         Title insurance

However, it’s important to note that the amount of closing costs is not calculated as a percentage – rather at the time of the deal, there are wide variety of fees that you have to pay that when added up, can amount to around 2-3% of your loan amount.

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