If you’re looking to purchase a new home, and want to pay out as little as possible up front, a no-closing-cost Fla real estate mortgage could be the right move. While the final decision is best made between you and your Fla real estate lawyer, it might be a great idea, and it could very well be right for you. But first you’ll want to discuss these talking points. Here are the basic ins and outs of no-closing-cost mortgages.
What is a No-Closing-Cost Mortgage?
With this type of mortgage, the lender pays the closing costs of your Fla real estate purchase, saving thousands of dollars at closing. Closing costs are typically 2% to 6% of the amount of your mortgage. On a $500,000 loan, that comes to between $10,000 and $30,000, not a small chunk of change.
There are multiple fees due at closing—which your Fla real estate lawyer can review for you in detail—covering things such as appraisal and title fees, processing fees, and the like. These fees can really add up, especially if you are already committing a huge down payment.
Here are the basic pros and cons one you’ll want to discuss with you Fla real estate lawyer.
The Pros
Perhaps the biggest pro on a no-closing cost mortgage is that you’ll save upfront cash. Additionally, you could use the money you’re saving toward a larger down payment. If you’re refinancing using a no-closing-cost mortgage, you will reach your “break-even” point sooner. This is the point when the amount you save in monthly payments by refinancing is greater than the cost of the initial loan.
The Cons
You will probably pay more in interest. In a no-closing-cost mortgage, your lender will recoup the closing costs they paid in the form of a higher interest rate, resulting in a higher monthly payment for the lifetime of the loan. You could also have a larger principal loan amount, which will also require higher monthly payments.
Many mortgage lenders will also add a prepayment penalty to the loan in case you want to seek a lower payment through refinancing.
How to Get a Low-Closing-Cost Mortgage
You may have your own lender at the ready, however, if that’s not the case, it’s more than likely your Fla real estate lawyer or agent has experience with available mortgage lenders and will know which one might be the best be the best match for you. Most lenders offer no-closing-cost mortgages, but they all have different rules for determining who qualifies. For example, they might require you to have a higher credit score, or a more detailed employment history. Ask around. Get review their requirements and get several quotes before deciding on one particular mortgage lender.
No-Closing-Cost Mortgage Alternatives
A no-closing-cost mortgage isn’t the only way to save some upfront cash at the closing table. Before going the no-closing-cost route, discuss these options with your Fla real estate lawyer and he or she may be able to assist.
- Negotiate. Closing costs aren’t carved in stone. Everything is negotiable, and most fees can be greatly reduced or waived altogether. This holds especially true with the application and origination fees charged by your lender. Explain your situation to the lender and ask them to lower or remove some fees. This will lower your upfront costs without increasing your interest rate or mortgage payment.
- Homebuyer Programs. Many cities and states have programs for first-time homebuyers, including grants and other forms of assistance that can be put toward your down payment and closing costs. Usually these are either a no-interest loan or a forgivable loan. These programs have income limits and other requirements, so be sure to examine them thoroughly.
- Ask the seller to chip in. Some sellers might be eager for the sale to go through and might agree to pay a portion of the closing costs.
A no-cost-closing does come with some conditions, but can be a great way to save some upfront money at closing. Talk to your real estate agent or Fl real estate lawyer about your situation to see if a no-cost-closing mortgage is right for you.
Contact Florida Bar Board-Certified Attorneys David E. Klein, Esq. and Guy Rabideau at Rabideauklein.com. They have the expertise and experience you need to ensure that your interests are protected throughout your real estate transactions in the Town of Palm Beach, across the Palm Beaches and throughout Florida. Contact Rabideau Klein today to discuss the legal implications of your Florida property transactions.