Monday, March 12, 2012

No Closing Costs Mortgage for Kentucky Mortgage Loans

No Closing Cost Mortgages in Kentucky

No Cost loan program there are no points, no origination fee or loan-related costs of any kind, guaranteed.
All closing costs including appraisal, credit report, lender fees, settlement fees, title insurance, recording fees, courier fees and any others are paid Kentucky Mortgage Lender. These costs are not “rolled into” your loan balance. You will not be surprised by hidden costs at closing.

We Pay These Mortgage Fees so You Don’t Have to:

A No Cost loan Kentucky Mortgage can result in bigger savings and better results for you, but remember that each borrower’s needs and situation is unique. A No Cost loan may not be your best mortgage solution. The No Cost loan program is not available to all borrowers or on all loan programs.

What’s the Catch?

No catch! There is a trade-off which you need to make sure is to your advantage. The rate on a No Closing Cost loan is slightly higher than the rate on other loans. Because the loan has a higher interest rate the lender pays us a commission. We use this commission (called the yield spread) to pay all the loan-related costs.
Since we are paying all the costs we are motivated to keep loan costs as low as possible and operate very efficiently, which in turn allows us to offer you lower rates.

How do I Know if a No Cost Kentucky Mortgage is Right for Me?

Do you know anyone who has paid off a Kentucky mortgage? Consider how frequently you or your neighbors move. The national data shows that the average age of a loan at the time of refinance is 3.2 years. If you pay loan-related costs with a normal mortgage and then refinance or payoff your loan in less than 6 years, you will be throwing money away.
To decide whether a No Cost loan is right for you, the first and most important question is what do your long term plans look like? Will you be in this home another 5 – 6 years? If rates drop will you have this mortgage for another 5 – 6 years?
The truth is that interest rates change as often as stock prices. Interest rates follow the bond market and can change just as rapidly. In the last year the mortgage market has changed more than a full point. Our customers who did No Cost loans at the beginning of the year were refinancing to lower rates by the fall.
Some of our clients have refinanced numerous times at no charge. Had they paid points or closing costs, they would have lost that money because rates dropped. Paying costs can be like flushing money down the drain. We have clients that refinanced 5 times — had they paid closing costs, they would have lost over $19,500 by now.

Ways to Pay Closing Costs

There are several ways to pay closing costs. Start by getting a Good Faith Estimate and then figure out which option will work best for you.

Good Faith Estimate

According to the Federal Reserve, the Real Estate Settlement Procedures Act requires that a lender give you a “good faith estimate” of your closing costs within three business days of your submitting your loan application.
Basically, the Good Faith Estimate (GFE) is part of shopping around for a mortgage. Because different lenders will have different requirements, closing costs can vary widely. So before you choose a mortgage, carefully look over the GFE to find differences between lenders.
While federal regulations aiming for more transparency in home lending have made good faith estimates somewhat more accurate, you have to remember that it’s still an estimate.
Saving for closing costs is a “hope for the best, plan for the worst” situation. Try to figure out the most you’d have to pay in closing costs and be prepared to pay them (while still leaving some cash in reserves). But you should also find the best lender for your needs and reduce closing costs as much as possible.

Pay in cash

The easiest way to pay closing costs, of course, is cash. If you have enough money in savings to pay for your down payment and your closing costs and to have cash in reserves, this is often the best option.
Paying more closing costs keeps you from taking out a bigger loan and can save you money on mortgage interest, which may save you a fortune over the life of your loan.

Roll it into the mortgage

If you don’t have plenty of cash on hand, you can roll your closing costs into your mortgage. Because closing costs are generally a small amount of money compared with your overall mortgage, most lenders don’t mind rolling part or all of the closing costs into the loan.
However, you do have to be careful because rolling your closing costs into your mortgage may mean you can’t spend as much money on a house. For instance, if, based on your credit, your lender agrees to finance up to 90 percent of the value of a $150,000 home, they may not go over that loan-to-value ratio, even to roll in closing costs.
In this scenario, say you’ve agreed to put $15,000 (10 percent) down on a home worth $150,000. Your lender agrees to finance 90 percent of the home’s value, leaving a $135,000 mortgage. If you don’t have cash for the $5,000 in closing costs, you could ask the lender to roll that into your loan, making your mortgage $140,000.
But if the lender isn’t comfortable financing 95 percent of the home’s value (a very high loan-to-value ratio in the world of home lending), you may be out of luck. In this case, you might have to find a cheaper home so that you can pay a smaller down payment and have money left for closing costs.

One thing to note: many government-backed loans, like the FHA and VA loans, are set up specifically for first-time or lower-income home buyers, who often have trouble saving for a down payment and closing costs. Because of this, it’s common for these loans to roll closing costs into the mortgage and to finance even above 95 percent of the home’s value.

Ask the seller to pay some costs

This is easier to accomplish in a sluggish housing market, or any time the seller is ready to get out of the home ASAP. In some cases, the seller will take part of the closing costs out of the money they’re getting when they sell the home.
If you don’t have money to pay closing costs, this is a good way to save money without increasing your loan (and, thus, your monthly mortgage payments). And what’s the worst that can happen? The seller may just say no.

Ask the lender to pay closing costs

Sometimes a lender will pay your closing costs, even if they don’t roll them into your mortgage. For instance, your lender might just outright pay $4,000 toward your closing costs but then raise the interest rate on your loan by 0.25 percent or more. (They’re not in the habit of giving away free money, after all.)
You’ll need to make sure this doesn’t come back to bite you. Figure out how much that extra interest will cost you over the life of your loan, or at least the length of time you plan to be in the home, and see if this is a reasonable approach for you.

Borrow for your closing costs

Taking out a separate loan for a down payment is usually a no-no. Your main lender wants to be the only one to have a claim on your home if you should default.

However, you could take out an unsecured loan to cover closing costs. Just be careful here, as interest rates could really bite on a personal unsecured loan.

Find Out How Much to Expect in Closing Costs

That’s a lot of information, and, unfortunately, it doesn’t tell you exactly how much you’ll pay in closing costs. You may not know exact closing costs until you’re ready to close on your home, but you can get a good idea of these costs online by using these resources:

  • SmartClosing Calculator – This calculator from Zillow will calculate costs based on where you’re buying a home, so taxes and government fees will be added in. The calculator will also show you the total amount you can expect to pay in mortgage payments, including real estate taxes and homeowner’s insurance.
  • Federal Reserve Settlement Costs Worksheet – This worksheet is good for comparing potential mortgage. It lets you compare the closing costs for two loans.
  • How do closing costs impact my interest rate? – This calculator from Yahoo! Homes will show you how financing closing costs, as opposed to paying them in cash, will affect your mortgage’s interest rate.

We are open 7 days a week. Call or text anytime with your mortgage questions.

Joel Lobb
Mortgage Loan Officer

Individual NMLS ID #57916

American Mortgage Solutions, Inc.
10602 Timberwood Circle 
Louisville, KY 40223

Company NMLS ID #1364

Text/call:      502-905-3708

Congrats, Joel Lobb, Mortgage Broker FHA, VA, KHC, USDA has a 5 star rating on Google
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