Many homebuyers know they need to save for down payment when getting ready to purchase a home. They work hard to save 5% or more of their estimated sales price but then are disappointed to find out they need another 3-5% for the closing costs. Years ago, it was common place for sellers to help with the buyers closing costs but in today’s sellers’ market, buyers are typically having to cover their own closing costs.
Local Mortgage offers homebuyers a way to help with those fees. We offer each of our customers a range of rate options, some with reduced fees, even some with zero in closing costs.
This can be a useful tool to help you get into that new home you have been working so hard to buy.
How it works
A no cost loan is one where the lender is paying all of the fees for your transaction. This includes their lender fees, appraisal fees, the title fees including title insurance, recording and transfer taxes.
The rate you receive for a no closing cost loan is generally slightly higher than one you would receive if you were to pay the costs. The lender is using their excess revenue generated from the higher rate loan to apply to your closing costs.
Things to Consider
Lower rates over a longer period of time will always save you money, but that may take a long time to realize. For example, if you pay $5000 out of pocket at closing in exchange for a $100 lower payment, it will take you 50 months to recoup that $5000. If you are comfortable that you will keep the loan for a long time, then paying the costs may be beneficial. But if you aren’t quite sure how long you will keep the home or think you may get the chance to refinance in the first 50 months, then the higher rate and less out of pocket would be the better option for you.
Keeping some cash in your pocket is always a good move, especially when buying a new home. There may be cosmetic things you want to do to the home or you may need to buy new furniture. Saving some cash for these options is a better move than using credit cards to finance your renovations or furnishings.
Pre-Paid Items and Escrows
Keep in mind, at closing you will still need to pay upfront items related to insurance and taxes as well as establishing your escrow account for taxes and insurance. These are not considered costs as they are items you would pay as the homeowner even if you did not carry a mortgage.
Start Your Mortgage Calculations with Local Mortgage
If you are looking to purchase a home and would like to discuss your particular situation, feel free to contact a Local Mortgage Loan Officer. Our team of experts is here to help you through the process and help you determine what type of mortgage is right for you.