 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|
©
2002 Ruth E. Campbell. |
|
|
Frequently Asked Questions Mortgages
- Q & A Q: What about these ads for no-cost loans?
A: In many states,real estate regulatory agencies are
cracking down on such advertising. The very term, "no-cost"
loan, is misleading because borrowers are actually paying a
higher interest rate in exchange for not having to pay fees
or closing costs up front when the loan is secured. A "no-points" loan is one for which the lender does
not charge points (one point is equal to 1 percent of the loan
amount). But there are other fees involved in no-point loans,
as with most loans. Q: Is there such a thing as a no-cost or no-fee loan?
A: No. While some lenders occasionally promote "no-cost"
loans, banking regulators have cracked down on these misrepresentations.
Advertised "no-fee" loans may actually cost the borrower
more over the long term because these costs are often rolled into
the new note through higher interest or more principal. A typical no-fee loan is one where the points charged and all
fees are included in the loan principal, meaning that the borrower
does not pay these expenses at the close of escrow, but instead
ends up paying on them over the life of the loan. The loan is
called a no-fee loan because the borrower is not charged any fees
up front. |