What is a “no cost” FHA Loan?
Posted on | October 19, 2009 | No Comments
The closest thing to a no cost FHA loan is a streamline refinance though this is changing very soon just like so many other things in the loan and mortgage world. A streamline has been done in the past without an appraisal and credit is pulled to verify that the mortgage has been paid over the last 12 months on time. I have read through several of the changes on this loan and will post more once I have the total picture but even the way it was has a cost.
What most people are referring to as a “no cost” loan is a loan where you don;t have to come out of your pocket with money in order to get it closed at a better rate. The problem with this is that is does actually cost you money at some point. The money is coming out of your equity and most people don’t count that as actual dollars but they should! When you sell your house, those dollars are lost in fees and costs for the loan and you won’t get them back. Unless you have a really large reduction on your rate or stay in your house and don’t refinance again and pay it off in full you run the risk of never recovering your money. Make sure your loan officer goes over the true cost of the loan before you ever close it; purchase or refi.
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