Teachers Federal Credit Union, or TFCU, offers a no closing cost mortgage option. Because Teachers Federal Credit Union is a Credit Union, you have be in their field of membership. TFCU is based in New York state, so you will more than likely have to reside near them or have family that qualify for TFCU which would then also make you eligible to join their Credit Union. The list of eligible groups of individuals are large by the groups that are associated with them and the list of designated areas within Suffolk County New York that qualify. While TFCU offers many of your standard mortgage types, we are going to discuss specifically the no closing cost mortgage option that they offer.
Onto their no closing cost option mortgage. They require a rate add on of 0.50% for loan to value of 80.01% to 95%. For loan values up to 80%, they only require a rate add on of 0.25%. This rate add on is what is used to cover the costs they would incur to give you the requested mortgage. You could always just pay the closing costs on your own and take the lower rate, but you would have to figure if that is worth it too you; their estimate is that you are looking at approximately 3% of the mortgage amount for your closing costs. From what I can tell, the no closing cost option is available for purchase and refinance mortgages which is great because purchase mortgages are difficult to accomplish with no closing costs.
Note: They do state that for refinances, there could be additional rate adjustments depending on your credit score and the loan to value of the loan.
If we just use nice round numbers at 30 years, at today’s rates of 5%, you are looking at the following:
| Amount | 3% of Closing Costs | Regular Payment | No Closing Cost Payment at <80% | Difference | Months to recover closing costs |
| $100,000 | $3,000 | $536.82 | $552.20 | $15.38 | 195 |
| $200,000 | $6,000 | $1,073.64 | $1,104.41 | $30.77 | 195 |
| $300,000 | $9,000 | $1,610.46 | $1,656.61 | $46.15 | 195 |
So what the chart above shows is that if you choose to go with paying the 3% estimate in closing costs, it will take you about 195 months before you start saving money if you choose to pay closing costs. If we take it that your loan to value is greater than 80.01%, it would still take 97 months before you recovered the closing costs and actually started saving money.
You can choose to go with any of the following for your mortgage terms, 20, 30, or 40 years. If you decide to change the term of the loan, the rate increases by 0.125% for each ten year increase that you choose, so for instance, if you wanted to pay on a 30 year schedule, it would cost 0.125% more in interest rate than the 20 year payment would; and the 40 year rate would be another 0.125% more expensive than the 30 year payment.
Something else that I notice is in the list of all of the fees that TFCU will cover is the first year of your mortgage insurance, or PMI, premium. That could potentially be worth $1,200+ a year if you are at about 95% for your loan to value. That’s a pretty big deal in my opinion if you have to carry PMI. The other fees that TFCU will cover with the no closing cost option are as follows:
Appraisal Fee
Underwriting Fee
Title Insurance to include the title searches
Recording Fees
Tax Service Fee
Lender Attorney Fee
Flood Insurance Fee
Teachers Federal Credit Union does list other fees to either get a longer rate lock period or you can also buy down the interest rate. To save on the rate lock fee, choose the shortest period to take advantage of the lower fee and make sure that you have your documents in order. I wouldn’t buy down the rate only because the no closing cost mortgage option gives you the flexibility to refinance if the rates drop more. These suggestions apply regardless if you take advantage of TFCU’s no closing cost mortgage option or pay customary closing costs because they show the same buy downs and fees on their regular mortgage. To lock in your mortgage rate, you have to go to a TFCU branch office and ensure that you have the money in your TFCU account so that you can pay your fees.
TFCU lists the following paperwork they will need to process the mortgage:
- a. Online Mortgage Application
OR
b. Fannie Mae 1003 Mortgage Application
- Borrowers Authorization
- Acknowledgement of Lock-in Options
- Unrelated borrowers must fill out separate applications on items 1-3.
- Floating Rate Agreement
- $425.00 non-refundable application fee.
- Proof of Income:
- Salaried Borrowers - One (1) Year W-2 (2008) and CURRENT paystub for EACH applicant.
- Self-Employed Borrowers - Include CURRENT and PREVIOUS years
(2007-2008) tax returns with schedules attached. - Retirees - Submit Social Security Award Letter, Pension Award Letter, or 1099's and One (1) month Bank Statements verifying Direct Deposit.
- Copy of Deed - REFINANCE ONLY
- Copy of Guarantee Survey - REFINANCE ONLY
- Certificate of Occupancy for all structures and improvements - REFINANCE ONLY
- In addition to the above, PURCHASE Applications MUST include:
- Executed Contract of Sale
- 2 consecutive months bank statements showing funds available for closing
- Copy (front & back) of cancelled Down Payment Check
TFCU also allows those that already have a mortgage with TFCU to go through the “Refi-Plus Mortgage Refinance” which from appearances, looks like it is a cheaper way to refinance your mortgage. You can only utilize the Refi-Plus program if you are looking to lower your interest rate, or changing the length of your mortgage, either shortening it or getting a longer term but not refinancing from an existing 30 year mortgage to another 30 year mortgage at the same interest rate. The application fee is only $225 versus $425 like on a new application. Their document requirements don’t appear to need as much information as a regular mortgage.
Salaried Borrowers: Current paystub for Each applicant
Self Employed Borrowers: Include Current and Previous years (2007-2008) tax returns with schedules attached.
Retirees: Submit social security award letter, pension award letter, or 1099s and one month bank statement verifying direct deposit.
You can always find out more information on Teachers Federal Credit Union by calling them or stopping by any of their branches. Their numbers are listed as 631-698-7000 if you are within the NY Metro Area or 800-341-4333 if you are outside of the NY Metro Area.
To sum it up, it appears that Teachers Federal Credit Union is encouraging consumers to go with the no closing cost mortgage option that they offer considering that the rates are so competitive versus a regular closing cost mortgage, and the fact that it takes 195 months to recover 3% of closing costs on a 30 year mortgage with a LTV of >80%, that’s 16.25 years folks, more than half the time for a 30 year mortgage. Might as well just go with their no closing cost mortgage option.
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