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NO CLOSING COST MORTGAGE FAQS

What is a no closing cost mortgage?

A no closing cost mortgage is exactly what it sounds like, a mortgage where the customer pays no closing costs. The homeowner will only have to provide a down payment plus required prepaids for interest, taxes and insurance. All other standard charges are paid by the lender.

How much will that save a prospective homeowner?

Closing costs for items such as attorney fees, appraisal fees, and other typical charges usually exceed $3,000 and can run upwards of $5,000. With a no cost mortgage the amount paid by the homeowner is zero.

Is there a benefit to paying closing costs?

Closing costs are a form of finance charges required by the lender but charged to the homeowner. Homeowners who pay these lender charges obtain a slightly lower interest rate. But interest rates and costs go hand-in-hand, so the lower rate is only part of the evaluation.

Why choose a no cost mortgage if the rate is higher?

Paying these expenses on behalf of the lender typically saves the homeowner a negligible amount per month, and it takes years to “break even”. If the homeowner elects to pay $5,000 in costs, the savings in most cases is roughly $50 dollars per month. It takes 100 months to reach the point where paying those costs provides any benefit. Since the average life of a mortgage has been less than 50 months since the 1980’s, most homeowners never benefit from paying costs.

Another obvious benefit is that a no closing cost mortgage frees up the $3000 – $5000 that would have been used to pay closing costs. Those funds can now be used to pay for other home ownership costs such as MOVING EXPENSES (click here to visit our recommended moving company, Two Men and a Truck), furniture, landscaping, even making a larger down payment.

If most loans aren’t kept for 100 months, why doesn’t everyone choose a no closing cost mortgage? Many lenders don’t offer no closing cost mortgages, at least not as a primary option. They’d rather you pay the costs than to do it themselves. Besides that, some restrictions apply to no closing cost mortgages. Minimum loan amounts, credit scores, and appraised value all factor into determining eligibility. However the majority of loan requests are eligible for no cost financing. It’s important to note that every homeowner must exercise appropriate due diligence to understand all the mortgage options and select the best one for their unique situation.

When Miller Lending Group owner Gordon Miller did his first no cost mortgage in Michigan in 1987 the concept was brand new. Today, Gordon and the Miller Lending team have been offering no closing cost loans for over thirty years and no closing cost mortgages are a significant part of today’s lending environment, available in all 50 states.

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