What is a “no cost” mortgage?

A “no cost” mortgage is a type of loan offered in the state of Washington that allows the borrower to not pay the closing costs associated with obtaining a mortgage. These costs can add up and include such things as loan origination fees, appraisal fees, title insurance, and other administrative costs. When a borrower takes out a “no cost” mortgage, the lender agrees to waive some or all of the fees and closing costs associated with the loan. In order to make up for this, the lender may charge a higher interest rate than they would charge without the “no cost” option. This means the borrower is essentially paying for the waived fees over the life of the loan in the form of a higher interest rate. It’s important to note that the term ‘no cost’ does not actually mean free, it simply means that the borrower does not need to pay out of pocket for the associated costs. A borrower should always weigh the pros and cons of taking out a “no cost” mortgage before signing any papers. A “no cost” mortgage may be a good option for a borrower who doesn’t have the cash on hand to cover the closing costs or who doesn’t want to use their savings. It is important to understand the terms of the loan and to work with a lender who will clearly explain all of the costs associated with the loan so that the borrower can make an informed decision about their mortgage loan.

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What is a “no cost” mortgage?

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