What is a No Closing Cost Purchase loan?
No-cost home purchasing seems like an idea that’s too good to be true. But it’s here, and it’s waiting for homeowners at Family Mortgage. The no closing cost mortgage does not increase your loan balance by one penny and can save you hundreds of dollars per month. What’s the Catch? This sounds too good to be true… No catch! The rate on a no closing cost loan is slightly higher than the rate on a loan with closing costs. Your loan will have an interest rate that is slightly higher than the rate available for a loan where you pay your costs and/or points. Because the loan has this higher interest rate the lender pays us a commission. We use this commission (called the yield spread) to pay all the costs. Here’s why it works: Mortgages are traded on the securities market at the market rate, which is called “par”. The market will pay what’s called “an above par premium” (called yield spread premium) for rates in excess of par. Mortgage lenders can then turn around and use this money to pay
