Considering A No Closing Cost Mortgage?

You’re preparing to buy a home and want to be financially wise with your purchase. After all, your residence is a large investment that you’ll need to pay off over time. You may be considering a no closing cost mortgage as one of your options to save a little extra cash up front. But what does this payment process look like? Is it the best option over the long run?

Before answering those questions and more, let’s take a look at how mortgage closing costs work.

Mortgage Closing Costs

There are various types of expenses that come with purchasing a new home. With a conventional mortgage, you’ll need to budget for your down payment, and pay for an inspection, and appraisal. You may also need to pay fees for a real estate attorney, title insurance and more.

Mortgage closing costs are also included. Sometimes, you’ll negotiate with a seller to pay a portion of these costs, but you’ll often be responsible.
These are the fees you pay your mortgage company to close on your new home loan, and they vary based on a variety of factors like your down payment, loan type and the area you live in. Bottom line: your mortgage closing costs will generally be anywhere between 3% – 6% of your purchase price. This equates to roughly $6,000 – $12,000 for a loan on a $200,000 house.

Closing Costs vs. Cash to Close

Cash to close is included in your closing costs. It’s the money you pay without the associated fees and any earnest money deposit that was made when you put an offer on your house. Cash to close is included in your down payment. You bring it to your closing to finalize your home purchase.

A No Closing Cost Mortgage

If you’ve determined that the other payments and fees surrounding your mortgage are all you initially want to pay, you may consider a no closing cost mortgage.

What is a No Closing Cost Mortgage?

A no closing cost mortgage means the lender will pay your closing cost fees up-front, but will earn those funds back over the life of the loan, plus interest. It does not mean the buyer does not have to pay closing costs. They will instead have those packaged into their monthly mortgage payments.

Is a No Closing Cost Mortgage Right for Me?

The key question to ask is whether you want to save more money up front or in the long run?

With a conventional mortgage, you may be required to pay a greater sum initially. However, a no closing cost mortgage will have a higher interest rate, meaning you’ll pay the closing costs with excessive interest attached by the time you pay the loan back. This could be several thousands of dollars more than what you would have saved if you paid the closing costs up front.

Having a lower interest rate is almost always the more valuable option. 

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The Advantages of a Lower Interest Rate

You’ll keep more money in your pocket with a low interest rate throughout the entirety of your mortgage payments.  Perhaps you’ll need to save up after the initial purchase of your house, but over time, it will be easy to recognize the money you didn’t spend.

This is especially evident when you work with a different kind of mortgage company who values your well-being and has the experience and resources to give you a great interest rate. is Florida’s premier online mortgage lender and can help you secure a mortgage that fits your lifestyle.

There is no right or wrong answer to the type of mortgage you select. A no closing cost mortgage could be an option for first-time home buyers who can’t make the initial contributions. However, for experienced home buyers, a low rate is certainly desired.

If you’re interested in buying your next home, apply now for an affordable loan. We specialize in providing financing for buyers who have at least 10% down, a credit score of 680 or better and know they qualify. Let us remove expenses and give you a different kind of home buying experience. Get pre-approved today!