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.
