Is it possible to purchase a home with no closing costs.
I mean, I have more than enough money for a down payment.
A recent check has left me with enough money to pay off all of my debts, and after taxes and fees I will still have $66,000 left and I am willing to put around $45-50,000 down as a down payment but I can't stand the thought of paying fees and stuff.
To me it's just rediculos.
I mean I am borrowing around 50-60 thousand dollars and they want to stick me with fees to take out a loan.
Thats crazy.
I know you can get a re-finance with no closing costs, but I am talking about me seeing a house for sale in the paper or on the internet, and buying it.
I want to avoid closing costs.
Please no answers from people who all they do is search google for all their answers.
I am looking for someone who actually knows what they are talking about.
I am looking to purchase a home within the next 30 days in Lake County Indiana if that makes a difference. Good answers for the first two.
But, I still don't understand.
What services are you talking about.
I would be more willing to pay these fees if I know what they are. You got really luck here. Everyone's answers are right on the money here. I'm going to break this down as simple as possible for you so you can understand how banks make money.
Banks only make profit off of interest. If they charge 7% on your loan, that covers the cost of funds (what the bank paid for the money), servicing (your monthly statement, customer service, website) and whatever is left is their profit.
Fees are charged up front because they are directly associated with the transaction itself. Once the initial transaction is completed, the people and departments paid in the transaction are no longer used. Here's a breakdown of some basic fees and why they are necessary.
1. Processing Fee: $200-$300 flat fee. Banks have an entire department that does nothing but review your qualifying documentation (bank statements, paystubs and any other document required to approve you), ordering appraisals and other necessary reports, communicating with all parties involved to update them on changes, requests, and closings. I'd say that processing is about 4 hours per file and usually touches 3 people during the processing portion. Included in the processing fee is the overhead to keep the lights on in the building and the lease paid as well as the computers, paper, salaries and benefits. Pull through processing is usually 75%, so you are also paying for the 1 out of 4 files that don't close.
2. Underwriting Fee $300-$600. It's exactly the same as processing, but underwriters get paid more than processors because their job requires more skill. Same applies to overhead expenses.
3. Closing Fee $200-$300 same idea as the other two, but you are paying people to prepare all of your legal documentation.
4. Application Fee $400... usually credit towards your closing costs, but is taken up front in case you decide to back out of your loan, the bank can recover most of the costs incurred while prequalifying you.
5. State Associated fees: Recording, state tax, intangibles... blah blah blah.... these are charged by the state... bank has no choice but to charge these.
6. Title Fees: Title companies are a seperate entity from banks. They charge for their services.
7. Appraisal Fee: Appraisers are not employees of the bank. They are a third party that gets paid to provide us an appraisal.
All of the above is charged the way it is because it is transactional.
NOW>>>>> LISTEN UP >>>>> the point has been made, but I'm going to simplify it. Here are some terms that you hear. I will explain them.
NO CLOSING COST LOAN: If a bank qualifies you for a certain interest rate like 7%, but you don't want to pay closing costs, they will raise your interest rate to 7.25%. If you don't want a higher rate, and you don't want to pay closing costs, they will charge what's called discount points. Though not considered a closing cost, discount points have to be paid at closing. Just because you receive a NO CLOSING COST loan doesn't mean you are coming to the table with a down payment alone.
SELLER PAID CONTRIBUTIONS: This is where the seller will pay your closing costs for you. This allows you to have the lowest possible rate without having to pay points. This sounds like free money, but for every $1000 a seller pays in closing costs for you is probably $1000 higher that you are paying the in the sales price of the home.
Recommendation: If you have the funds, you are far better off paying the closing costs yourself at closing so you can have the lowest possible rate and the lowest price on the purchase of your home, which means the lowest balance financed.
Finanally, you mentioned that you are frustrated with fees associated with providing a product to you. Let's put this in perspective.
You are paying out about 2% in fees on average in fees when you take out a mortgage... monetarily this comes out to $1200 on $60,000. It takes me 10 hours of my time per loan including my own processing, structuring and the time I spend with the client on the phone. So, hourly, it comes out to $100 an hour.... Let's compare the cost of a mortgage to other industries.
When you go out to dinner and it costs $20 for a meal, you probably tip $4. That's 20%... you're there for an hour.
A car mechanic charges $60 an hour to install a $30 piece. that's 200%
You pay for more on a daily basis to receive products and services that require far less legalities, third parties and thought... put it in perspective.
Caseycasperson.com casey.x.casperson@chase.com Do YOU work for free?
You could see if the sellers will pay the closing costs but one way or the other there are closing costs and someone has to pay them.
Even if you got a so called "no closing costs" loan (there is no such thing) you will pay in the form of a higher iterest rate.
WHY? Because no one works for free. What you may not understand is that there are a number of 3rd party vendors involved in the home loan process and they charge for their services. Without their products and services mortgage loan could not exist. Many of them supply services and products that directly benefit you, the borrower.
Like PJ says, no one works for free and the value youu receive is worth the expense. The main way to avoid closing costs in this market is to write into your offer that the seller has to pay some or all of them. Hi, this is Corey Garrison of Global Mortgage. There are a lot of costs associated in doing a loan, and as someone previously said no one works for free even in a refinance.
What no one tells you is that even if they say no closing costs they get their money from the buyer in the secondary mortgage market by giving you a higher interest rate. In most cases it is beneficial to pay for the fees up front.
I justify my costs because as a broker I walk you through the entire process, from reviewing your credit (which costs me to get), searching hundreds of lenders for the loan that best fits your situation.
There are also attorneys, title companies, and insurance companies involved and each have their own costs. The best thing you can do is get seller concession, which in most cases can go up to 6% of the purchase price. A good real estate agent can help you in negotiating that.
I hope this has been helpful. If you have any questions, please feel free to contact at cgarrison86@yahoo.com. Good luck with everything. Here is an example;
$365 Appraisal; If you want a mortgage they need to know how much the collateral is worth.
$575 Underwriting; This is to pay for the processor, underwriter, closer, post-closer (all involved with the transaction)
$425 Closing; This pays the salaries of everyone that touches the file at the title company.
$200 Title Insurance; This insures that you are going to be the owner and the house is free of liens when you purchase it. If someone comes along down the road and claims that they are owed something from the proceeds of the sale, it is the title companies responsibility.
$65 Recording; The county charges a fee to record the deed and mortgage.
The loan officer and company split the amount of money made on the interest rate. By taking a higher interest rate, the loan officer may be able to pay some of those fee for you. Best of luck. Do you have a real estate agent? If so let them know that in your purchase contract, as part of your offer that you want the seller to pay closing costs- this has been increasingly popular and a great incentive in my area. |
