Bank of America No Closing Cost Mortgages

Bank of America is a VERY large bank that offers loans, deposit accounts like savings, checking, money market accounts, personal services, mortgage products for instance like a Bank of America Home Equity loan or a Bank of American mortgage refinance; you name a service that a bank could potentially offer, and Bank of America probably offers it. Bank of America is also usually known as BofA or BOA, using the initials from it's name, Bank of America.

The service that I'll be discussing of course are no closing cost mortgages offered by BofA and how to potentially go about getting one from BofA.

Bank of America purchased Countrywide Financial last year, in 2008, and became the largest lender as well as servicer of mortgages in one well swoop. By becoming the largest lender in the nation, the potential for BofA to offer great rates is there, their website however in my opinion does not allow for rates. Per their website, I could not find a no closing cost mortgage rate offering from BofA, no closing costs in the sense that I've been discussing in previous articles and like Wells Fargo does. Between two large, and now one lender, neither of them has a no closing cost mortgage available, at least on their website as an option.

I have called in the past to a Bank of America bank branch and asked a local mortgage representative and they made me believe that you could get a higher interest rate to get a no closing cost mortgage. Now, your rate will probably go way higher than it should because of the fees and costs associated with acquiring a BoA mortgage. Not to mention the fact that in my opinion, BofA mortgage rates are not the most competitive to begin with. While they don't appear to be too excessive, the higher fees with the higher, par, or starting interest rate on their mortgages make the proposition too expensive. Again, you may find a good deal with Bank of America because I know they do have them on occasion, but in regards to a BofA no closing cost mortgage, they don't have them.

Countrywide, who was acquired by Bank of America, did have a mortgage program that was a play on words and was promoted as a way of refinancing your mortgage with no closing costs. The details revealed however that you were still charged closing costs, but those costs get rolled into your mortgage. That was of course in the past, but I believe you still can do the same thing with Bank of America. In effect, what happens is if your mortgage was for $100,000, you would actually get a loan for $103,000, with the $3,000 going towards your closing costs. What that does though is require you to pay for your closing costs over 30 years or however long your mortgage is for. I don't know if this program is still available or not with any certainty, BUT, this program was usually only available on BofA mortgage refinance loans. I can't comment if it is or was available on purchases, but I wouldn't think so because then that would take your loan to value amount beyond 100% unless you put money down when you purchased your house. If you put money down on your house purchase though, you could always divert money to your closing cost instead of lowering the amount of your mortgage. I however think that this is not a good way getting your mortgage.

I can see some smart people reading this and saying, but if you take a no closing cost mortgage, your going to take a higher rate anyways and pay for your mortgage closing costs anyways. I say, very true! HOWEVER, with no money out of your pocket for that no closing cost mortgage, how long do you have to wait until you find another better deal before fretting about how much you all ready put towards your closing costs? How long does it require you to figure out your payback period? How long before you ACTUALLY start saving money on your mortgage.

As soon as I close on a no closing cost mortgage, I already know my payback period and I don't have to horse around with trying to figure out my payback period. I'll let you in on the secret, my payback period is 0! That's right, because no money came out of my pocket, then I don't have to try and figure out how many months to divide into zero because I had zero closing costs. Now what's the argument?

I'm sure that the next thing your thinking is, yeah, but then you'll pay for that higher rate for a longer period of time, potentially even, up to 30 years. That's true. But the average American moves approximately every 7 years. Not a concern really, UNLESS you plan on living in that house for the rest of your life or, 30 years, then heck yeah, get that mortgage with a point or two and take that lower payment and pocket or save the rest. That's where paying points and closing costs make sense, if you intend to stay in your house for a long period of time. Otherwise, stick with minimal closing costs to save cash in your pocket for other items.

One of the reasons why no closing cost mortgages are also drying is because of the Yield Spread Premium, or YSP, is getting smaller. One way of looking at the YSP is like a commission that a lender will give a broker, in essence, for getting a consumer, that's you, to take a mortgage at a given rate. So for instance, in today's market, you may be able to get a 30 year mortgage at a fair 5.5% interest rate. Well, if the mortgage broker can get you take a higher rate, then the Yield Spread Premium is then paid to the broker as a commission. In reverse though, if the broker is playing honest, then you can pay for a lower rate. You can also see how much the YSP is by checking your HUD-1 statement that you receive at closing. Many places don't want you to pay attention to it so they will skip over it, but it will be disclosed to you at closing, just not as explicitly as I think they should, this is what the broker is going to make when you take the mortgage loan.

The YSP however is what allowed brokers to offer no closing cost mortgages. They would share the commission with the borrower and get lower closing costs for the borrower. The reason why the no closing cost mortgages are drying up is because lenders are no longer offering the fat 'commissions' that they used too because the market has changed.

That's all I'm going to say about the Yield Spread Premium at this time. I'll write another article discussing the YSP.

In the end however, I'm fairly certain that at this point in time, Bank of America, or BofA, does not have a true no closing cost mortgage. This does not mean you cannot get one of their brokers to setup one for you, it just means you may have to speak to a couple different brokers before you get it. Make sure you don't fall into the trap of financing your closing costs into your mortgage because that's a lot of interest you'll be paying for that privilege. And only get a no closing cost mortgage from Bank of America if you don't intend on living in the house for a very long period of time; because sometimes, it does make sense to pay closing costs on your mortgage financing, regardless of the lender. Just make sure the rate is competitive, unlike what BofA advertises for their mortgage rates on their website.