Most new home buyers are unaware of the various fees and costs involved while buying a house. Closing cost on mortgage is one such expense. This article is a small elaboration of the concept of closing cost and mortgages. To know more, read on.
There are several different compliance that have to be fulfilled when a person undertakes a loan, debt or for that matter any credit facility. A certain amount of cost is also incurred as a result of these compliance. The lender or the borrower usually bears such costs in order to sanction the loan. The no closing cost mortgage loans are however different in terms of closing costs.
What is a Mortgage Loan
The concept of mortgage or rather mortgage loan, is a pretty old one. Such a type of loan, is basically a real estate loan. The mortgage loans are applied for, by prospective real estate and property buyers. The mortgage lenders review the applicant’s background, credit report, credit history and most importantly, the land that the applicant wants to buy.
It must be noted that real estate market projections, play a very important role in the process of a mortgage loan sanction. After the loan is sanctioned, the applicant (who now becomes the borrower), uses the loan to buy the property. The property is then pledged as a collateral with the lender along with its lien. Thus, basically if the borrower defaults the loan, the lender is authorized to liquidate the property to recover losses, an unpleasant process that is termed as foreclosure.
What are Closing Costs
Real estate, which is also known as real property is an asset that is immovable. The process of transfer of property, is governed by many different enactments and local laws. There are several costs incurred while fulfilling these compliance. These costs are referred to as ‘closing cost’. There are three likely parties, that usually fully or partially undertake these costs, lender of the mortgage loan, which are, buyer, purchaser or the lender of the mortgage. Some important closing costs have been listed below:
- Attorney Fees
- Title Service Cost (transfer of title)
- Recording Fees
- Transaction Stamps
- Appraisal Fees
- Home Warranties
- Insurance company charges
Mortgages with No Closing Cost
The mortgage loans with no closing cost are very hard to come by, due to the fact that the closing costs in such loans are waived in process of borrowing such loans. These loans are very rare, and lenders often consider only the best credit reports while giving out such loans. The mortgage rates, are high in some cases, and in many cases, lenders recover the partial closing costs from the borrower themselves, through installments. The following are some important mortgage loans with no closing costs that are fulfilled by the lender.
- Title and Escrow Fees: These fees include the taxes and charges that are included in the transfer of title. These fees also include the charges that transfer the lien of the property to lender.
- Lender’s Fees: There are several different components of the lender’s fees, such as underwriting charges, document preparation and processing charges. These fees are waived by the lender.
- Appraisal Fees: The real estate appraisal fees are paid to the local authority, in order to increase the book value of the property. These fees in such cases are undertaken by the lender.
- Credit Fees: Keeping a tab on the credit ratings and reports costs the lender some amount of money. In such a scenario, these fees are also waived by the lender.
Now many of us might wonder aloud, that why in the world, does the lender waive and also bear such fees? The answer is simple, excellent credit report, that ensures a timely set of installments, partial recovery of charges through the installments, and lastly an excellent projection of the market value of the said property. It must be noted that almost same conditions are applicable for mortgage refinance too.