Now that mortgage rates have moved up, we are not hearing as many ads on the radio for “No Closing Cost” refinances… but I’m sure the commercials will change in the next ten days to talk about “Buying a House With No Closing costs.” (sigh…) As much as things change, the more they stay the same. You would think that by know people in North Carolina would be wise to the No Closing Costs Mortgage Program Commercials, but apparently they are not. Certainly, some Lenders keep on spending money on Ad’s to advertise that claim.
Tricking people into thinking that there are Mortgage Programs available without Closing Costs in NC is not funny – but I have to admit Steve and I do get a chuckle out of the Ad’s that we hear on the radio from Internet Lenders making this claim. Keeping in mind that mortgage rates are going up this summer, we expect to hear more adds pushing “costs” and fewer quoting lowest mortgage rates.
With the strengthening of the Consumer Protection Agency (CFPB) lenders are suppose to be very “transparent” in their communications with consumers. Advertising Guidelines are becoming more and more strict, which makes it more difficult for Lenders to make misleading statements like “they do not charge Closing Costs on their Mortgages.” However, even though these Lenders are making a statement that on the surface my appear to be accurate, are at the very least misleading the Consumer.
The reason I think it is misleading is because the Lender is really not stating that there are no Closing Costs, what they are claiming is that there are no Lender Closing Costs. These are two very different things, but even in stating that there are no Lender Closing Costs, the ads are misleading. What they are likely doing is hiding the Lender Closing Costs in the interest rate. Lender Closing Costs would include fees such as:
- Underwriting Fee
- Application Fee
- Escrow Closing Fee
- Processing Fee
- Credit Report Fee
- Automated Underwriting Fee
- Flood Certificate Fee
A Lender could elect to not charge these fees, but they would not stay in business for very long if they did. Lender Closing Fees are generally a small portion of the funds that a Borrower will have to come to the Closing with. The bulk of the Closing Costs are fees that are paid to Third Parties, and which the Lender has little to no control over. Third Party Fees would include:
- Taxes: Taxes are going to be collected by the town no matter who the Lender is.
- Homeowners Insurance: Properties need to be insured for fire, theft, property damage, and personal injury.
- Attorney Fees: NC is an Attorney State, meaning that an Attorney is going to do the Closing & does the Title Search as well. They do not work for free.
- Title Insurance: Title companies do not provide their service for nothing.
- Recording Fees: The Town Clerks Office is going to charge the Attorney to record the Deed on the land records, and I don’t know of any Attorney that is not going to pass on that charge.
- Appraisal Fee: Once the appraisal is done the Appraiser wants to be paid right away.
- Points: There are points that are not associated with the interested charged by the Lender. Those points are assessed by Fannie Mae, Freddie Mac, and FHA. These points are because of low credit scores, the Loan To Value, or for non-owner occupied properties to name a few.
There could be other Third Party Fees that are out of the Lender’s control, but these are the most common. As you can see the Lender Fees are minor compared to the Third Party Fees listed above, and the Third Party Fees are definitely not included in their claim that they do not have Closing Costs. Third Party Fees can easily add up to between $3,000 or more depending on the price of the property, and taxes.
Instead of always quoting No Closing Cost Mortgages, we take a different approach. We don’t believe that in mortgage lending “one size fits all.” Our experience is that it’s better for some clients to have a Seller pay part of their closing costs. Because Seller Concessions can be a problem on a contract that is not structured correctly, we like to keep our options open!
We generally quote mortgage rates without an Origination fee, so if you are comparing our mortgage interest rate to another lender, keep that in mind. If you are looking for the VERY BEST mortgage rate – not necessarily the VERY BEST closing costs structure – this will make a difference, and we will be glad to structure a rate and fee quote that works best for your goals!
If you are a First Time Home Buyer – there’s more than just a Rate that you need to ask questions about! Have questions about No Closing Costs Mortgage Program? We want to help you! Call Steve Thorne at 919-649-5058 and get a quote right now!