| What is it? | | | | Is this a good idea? |
| What's considered acceptable and appropriate is very | | | | Most borrowers are attracted to this concept because |
| different for everybody, therefore this question does | | | | it allows them to retain all of the money they'd saved, |
| not have a simple answer. However, there are some | | | | which would likely be better spent in another manner. |
| important aspects of this scenario that should be | | | | It's important for the borrower to acknowledge that |
| considered by all potential borrowers before they sign | | | | these additional monies added to the loan will actually |
| on the dotted line. | | | | cost significantly more over the course of the |
| Very simply, a no-closing-cost-mortgage is one into | | | | mortgage than if they had simply been paid with cash |
| which the lender allows the borrower to roll into the | | | | at closing. The mortgage interest rate will be applied to |
| borrowed principle all of the ordinarily out-of-pocket | | | | the entire balance of the loan, which will then include |
| costs associated with settlement. This concept is most | | | | the closing costs. |
| attractive to first time home buyers, or buyers who | | | | However, despite the fact that borrowers understand |
| have failed to set aside enough money for settlement. | | | | this concept, the majority of them still choose to roll |
| When it comes time for settlement, the lender will | | | | settlement costs into the loan because their main |
| simply increase the total amount borrowed by the total | | | | focus is the monthly payment; when borrowing |
| of the buyer's closing costs. Instead of the buyer | | | | hundreds of thousands of dollars, adding a few more |
| directly paying all required fees, the mortgage | | | | over the course of 30 years results in a barely |
| company will pay those on his behalf. | | | | noticeable payment increase. |