Missouri Housing Development Commission No Closing Cost Mortgage

The Missouri Housing Development Commission, MHDC, has rolled out the “Refinance Program” to help home owners who are underwater on their mortgage, or owe more than what their house is worth, refinance their mortgages and MHDC will pretty much fund your closing costs for free with certain conditions that have to be met, making the refinance a no closing cost mortgages. They also have another option which will in effect allow your to lower how much you owe on your house so that can refinance.

The way the first program works is that MHDC will give you up to 3% of your primary mortgage to use to refinance your house. That 3% can be used to cover the closing costs of your mortgage therefore making it a no closing cost mortgage. The stipulation is you have to live in the house for five years. As the five year clock ticks away, that 3% will slowly be forgiven until you owe nothing and the MHDC mortgage is closed out at the end of that five years.

You can only take advantage of the program if your payments will drop at least $100 a month or the interest rate will go down at least 1%. If you have a 7% mortgage, you have to refinance into a at least a 6% mortgage or less which in this environment is VERY doable. If you have a 6% mortgage, you’ll have to get the interest rate down to at least % which is very doable, or your payments will have to drop at least $100 a month. This may be difficult for many people although it will probably work for those who have significantly paid down their mortgage from the time they first took out the mortgage and are now close to 100% loan to value.

You cannot take out a cash-out refinance mortgage and you must receive a face-to-face counseling from a HUD approved counseling agency.

The same conditions apply above for the grant program, which is where MHDC will in effect give you money to pay down your mortgage to an amount in which lenders will loan you money. If you owe more on your house than it is worth, MHDC will give you a grant of up to 10% up to $10,000 to lower the mortgage on your house so that you can get within the guidelines to refinance your house. Let’s say that your house is worth $100,000, but you owe $107,500 on your house, they will give you $10,000 so that your loan to value will drop to $97,500 which would then put you into the FHA 97.5% refinance guidelines. Now granted, you will probably have to pay the closing costs on that kind of refinance.

You can also take advantage of these refinancing programs if your current mortgage is an ARM or Balloon without the 1% or $100 requirements. That’s great because it allows you to get out of an uncertain mortgage and into a fixed rate mortgage that you can plan your budget around.

The funding for this program is limited and it is usually on a first come, first served process. MHDC doesn’t say how much they’ve allocated to this program so I am unable to tell how many mortgages it may help out, but get there quickly to take advantage of the program. Also, you have to go through a certified lender and it appears that you may be able to take advantage of both programs at once if you need the assistance. I can’t answer for certain that question, but you should ask them.

The MHDC’s phone number is 800-246-7973.

Louisiana Housing Finance Agency No Closing Cost Mortgage

The Louisiana Housing Finance Agency, or LHFA, just released information on their housing assistance programs which also includes no closing cost mortgages options. The LHFA is funded just like other state and local housing agencies in the fact that their programs are usually funded via offering bonds, then taking that money and funding their programs. As expected, with the current financial situation our country finds ourselves in, LHFA was unable to raise as much money as they have in the past, in this case, only $25 million. While a large sum of money, if you consider the average asking price of a Louisiana home right now per zillow.com is $179,900. That will purchase almost 139 homes which also does not include the administration of the programs.

The program I am specifically looking at is the “Assisted Program Loans” which currently charges 6.1% on the mortgage loan, but will also provide a grant of up to four percent of the purchase price of the house. If we take that average asking price in Louisiana, the grant will provide $7,196 towards your closing costs, down payment, or prepaid items. If we take the average closing cost expense for Louisiana of $2,851 per Bankrate, then that leaves $4,345 that you can apply elsewhere, making your mortgage through LHFA a no closing cost mortgage.

You can then apply the $4,345 towards your prepaid costs such as your home owners insurance and property taxes which would obviously help out. You could also use it to help out with your down payment if you don’t have enough, which would equal approximately 2.5%. If the purchase mortgage requires 3% down, then you only need to come up with 0.5% for your down payment, or $899.50 to purchase the house. You can mix and match to fit your needs.

The numbers I am throwing out there though is only applicable for the average home asking price that I got from zillow.com. If the home purchase price is less, then obviously the dollar numbers will change, but the percentages don’t change.

There are income limits to this program which depends on the size of your family. Looking on LHFA’s website however, it appears that the numbers have not been adjusted for the latest time period because it does not line up with the numbers quoted on an article on WBRZ’s website article.

If you haven’t been living under a rock recently, you probably know about the $8,000 tax credit that is currently being offered for first time home purchasers. The definition of a first time home buyer is someone who has not purchased a home in the past three years and who does not own a house. Well, under the “Low Rate Homebuyer Tax Credit Program” offered through LHFA, they will front you $5,000 of that tax credit to use as a down payment or as closing costs for the purchase of your house. Again, making the program a no closing cost mortgage program. You will however have to pay the $5,000 back, probably once you’ve filed your taxes and received the money back. It appears that the loan would be a 0% interest no payment type of loan. If you don’t pay it back by June 30th 2010 however, the loan will start charging interest at 7.6% and it will appear as a second mortgage with the recorders office.

The great thing about this however is that you get to use other people’s money at 0% interest which is awesome because that is cheap money. One drawback to the tax credit however is it is only good until December 1st 2009. You have to have already purchased your house. Well, home purchases can take up to three months. If that is the case, then you need to have your offer accepted and mortgage started here in a couple days so that you can meet the December 1st deadline.

The $8,000 credit is also based on 10% of the purchase price of your house. If the purchase price of the house is $65,000 for example, your credit will only be $6,500. Still enough to take advantage of the credit, but some money is being left on the table. I’m not advocating you stretch yourself to get the rest of that credit, but if you are stable and can support a larger payment, you may want to look into taking advantage of the full tax credit. With the average price of Louisiana home prices being $179,900 however, the full $8,000 credit will be applicable to most Louisiana home purchasers.

You can of course also call LHFA and see what the requirements would be with the current plan. Their phone number is 225-763-8700. Remember, cash in your pocket is important so try and finagle yourself into a position so that you can take advantage of the LHFA programs to get yourself into a no closing cost mortgage.

Fremont Bank No Closing Cost Mortgage

Fremont Bank is a bank out of the Bay Area, as in San Francisco Bay area, and actually, from Fremont, and hence the name, Fremont Bank. They have 23 locations throughout the Bay Area. Because this site is mostly about mortgages, and specifically, no closing cost mortgages, and no closing cost mortgage refinance, that is what I’ll be concentrating on.

Because Fremont Bank is a relatively small banking institution limited to a small geographical area within the United State, they only lend in California, Nevada, and Oregon, it may not be useful to you unless you live in one of those states or are planning on moving to that area. Note, in Oregon, they only lend in Deschutes county, so it’s not even available to the whole state.

Currently, as of August 26, 2009, Fremont’s website states that their no closing cost mortgage rates are 5.25% for the 30 year fixed rate mortgage and 4.625% for the 15 year fixed rate mortgage. The APR is also set at the same rates which is indicative that there are no closing costs on these loans.

We know this because the APR has to show what your effective interest rate would be if all the costs to acquire the loan was included in the interest expense that you incur by taking the loan out. For example, and I’m going to use nice round numbers, let’s say you take out a loan for $100,000, and you only take it out for five years. Assuming you make all your payments on time, your total interest expense would be $13,227.40 which would equal 5% interest on your loan.

If the mortgage cost you $2,000 in closing costs, we would add the $13,227.40 with the $2,000 coming up with a total of $15,227.40 in total cost for your $100,000 loan. Your effective APR, or Annual Percentage Rate would be 5.819%. So you can see how your closing costs can affect your APR. The reason why it is so high is because your payment timeframe is short, in this example only five years. Now if we took the same numbers above and extended your mortgage payback timeframe to 30 years, your new APR would be 5.175% because that $2,000 would be amortized over the 30 years instead of the five years.

Back to Fremont Bank, the terms for this no closing cost mortgage is as follows:

- You may be required to pay an application fee. Now this is not too bad because Fremont Bank will refund or credit the application fee if/when you close your mortgage. I’ve only seen one reference, and the amount was only $300.00.

- This offer is only available for existing loans with no cash out and no subordination of non-Fremont Bank liens, like HELOC’s or HEL’s.

- What this means is you have to have an existing mortgage and you cannot pull any money out of home equity with this loan. You also cannot have a HELOC or a HEL from any other lender. If you have an existing HELOC or a HEL from Fremont Bank, they may allow that, but that would be a question for them to answer.

- The rate above is quoted for a $150,000 mortgage loan. I don’t know if it will get lower or higher if the loan amount is different or not.

- The LTV, loan to value, limits are as follows:

- 30 year is 60%

- 15 year is 80%

- This rate is also only available for owner occupied, single family homes in California with a 30 day rate lock. Again, if you are in Nevada or Oregon, the rates could be different, but I don’t know.

- The minimum loan amount is $125,000 and the maximum is $417,000.

With their list of requirements, I went to their rates page and ran some scenarios for all three states and it appears that even for $125,000 in all three states, the no closing cost option is still only 5.25% so everyone should be in luck.

There does not appear to be any escrow requirement from Fremont Bank if you refinance through them with the appropriate requirements. All this means is that you pay your own taxes and insurance instead of paying it to Fremont Bank and then they make the payment on your behalf. What you could do then is save the money in a high yield savings account and earn interest instead of the bank earning the interest.

They also appear to offer ARMS which also have a no closing cost option available to them. ARMS are only a good idea if you intend on living in the house less than the term of your fixed rate. Even then, if the timeframe gets to far out, let’s say five to seven years out, it would probably be best to take out a fixed rate loan because of the peace of mind it will afford you in case your situation changes. Also, with rates as low as they are currently, it would be crazy to look for an ARM. While I don’t claim to be Nostradamus or a psychic, interest rates are pretty freaking low right now. Why chance the potential that interest rates will go up?

The no closing cost option also applies to interest only, IO, loans. Now these are frankly just suicide unless you are GUARANTEED a huge rise in your income. Then again, if you are stretching yourself to afford a house on a IO loan, personally, I don’t believe you can afford the loan. No offense, but if you cannot afford a 30 year fixed mortgage loan, you can’t afford the house/loan amount. Find a smaller/cheaper house.

Fremont Bank also participates in Community Lending, these are those first time home buyer programs usually offered through your state or local government with down payment assistance or artificially lowered interest rates subsidized by taxes or HUD. They also claim that they have no closing cost options available on the Community Lending section of their mortgages. For these loans, however, there are additional requirements you have to meet so that they are helping lower income/disadvantaged individuals. For more details, you should contact the Fremont Bank mortgage department.

In the end, I have never heard anything negative about Fremont Bank, which doesn’t mean there does not exist any disgruntled customers as you cannot always please everyone. But the experiences I have read up on are positive and that Fremont Bank was a good deal in regards to getting no closing cost mortgages through them.