What is a “no cost” mortgage?

A “no cost” mortgage is a type of loan that allows a borrower to purchase a home without having to pay any out of pocket costs. This type of loan is available in California, and is often offered by lenders as an incentive to attract borrowers. The way a no cost mortgage works is that the lender allows the borrower to secure financing for the full loan amount, and then the lender pays for all of the third-party closing costs associated with the loan. This includes things like title insurance, recording fees, and other costs associated with the loan. In exchange for these costs being covered by the lender, the borrower pays a slightly higher interest rate on the loan. A no cost mortgage can offer a great advantage to borrowers who want to purchase a home but don’t have the cash on hand to cover the associated fees and closing costs. It also eliminates the hassle of having to search for and compare different lenders in order to find the best rates and fees available. However, borrowers should still be aware that there are costs associated with a no cost mortgage. While the lender covers the third party closing costs, the borrower still has to pay for their own appraisal, credit report fee, and any other costs that the lender does not cover. Additionally, borrowers should also be aware that by taking on a no cost mortgage, they may be paying a higher interest rate on the loan. Overall, a no cost mortgage can be a great option for borrowers who don’t have the funds available to cover all of the associated fees, as long as they understand the costs that may be associated with the loan.

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What is a “no cost” mortgage?

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