Chase’s Streamlined Refi/Mortgage Rate Reduction Program for ‘good’ customers

I just ran into this program recently and thought I would discuss what I know about it so far.

Consumers with Chase mortgages have started receiving Fedex packages on their door offering them the ability to refinance their existing mortgage into a lower rate and payment, with no closing costs. Obviously, you think there is a catch to the offer, as I too would, but after investigation, you find that it’s not. Let’s take a look at the "Chase Rate Reduction Program" as it is called.

Chase is offering in effect, a no closing cost mortgage for customers that have equity in their houses, and have been making payments with no late payments; don’t know how far back their history goes, but if it’s been a while since you had a late payment, it may be worth looking into. This is a screaming deal because the offer comes to you and you don’t have to go hassling with mortgage brokers and banks looking for the best deal, unless your adventurous and like hunting for the deal.

So this is how it works, you receive a Fedex package in the mail from Chase with a number to call and reservation number. You call the phone number and bam, your moving along. Chase is doing this from what I see, you have a week to respond. The process seems pretty painless too because they are looking for a 1 page authorization form and proof of your homeowners insurance and BAM! New mortgage with a lower payment!

Once you fax in your forms, you’ll receive a Good Faith Estimate, or a GFE, with everything outlined and instead of having to send anything back to Chase, you get a call to schedule your closing and hello new mortgage with no costs! This sounds like a KILLER deal right now, but I’m with Wells Fargo right now.

If you haven’t received the package yet, don’t fret. People are reporting they called asking about the program and one person stated that Chase called back with a ‘new offer’ that did decrease his interest rate and his payments! The phone number to call is 866-818-7033. Another number that may be associated with this program is 800-550-7485.

Now if I was a Chase customer that fit this profile, I would get on it, but I’m not, but I would like to share the word with people and get the word out about this program. Does Chase have the best deal out there? Maybe they do, and maybe they don’t. There could be deals out there that is better than Chase’s, BUT, Chase’s deal is pretty simple and painless. Who wants to dig out their pay stubs and tax forms and hope the appraisal comes up with a value that will allow you to refinance?

From my analysis, the interest rate that you are offered is based on what the rate is when they mail out the letter to you. I don’t know if you can haggle on the rate, but, I would like to know if it’s possible or not.

Another plus on the deal is that if you do an autopay for your mortgage, they will give you 1% cash back. I’m unclear if they give that money to you or if they apply it to the mortgage. It’s definitely not very much money, but it’s a little extra. I also am unsure if you have to autopay from a Chase deposit account or if you can autopay from any account.

Now to the why they are making this offer to existing customers, well, a couple possible reasons the way I see it.

First, this is the part where they can show to the government how they are helping the homeowner, and this is benefiting those of us who are still making payments diligently and doing our part for society.

Second, they don’t want all of these high quality loans to get refinanced with other banks and then they lose out on their ‘A’ mortgage paper and this is a way for them to keep your mortgage on their books.

THIRD, I’m smoking a crack pipe and somebody thought they would do of their customers.

Now some things that will disqualify you from this program/offer from Chase.

- It cannot be an investment property.

- You probably can’t have any late payments, or at least not in the recent past (I don’t know how far back they may go.)

- You need to have equity in your house, probably a good portion of equity too.

- You can’t have another loan on your house like a Home Equity Loan or a Home Equity Line of Credit; HEL or HELOC. This may be OK if the loan is with Chase, but if the second loan is with another bank, the answer is no.

Regardless, this is an AWESOME deal; first because of the ‘no closing cost’ refinance characteristics and because it’s simple and easy, remember, authorization form and proof of homeowners insurance.

Now that I’ve talked it up, let me bring some downers to the table otherwise it wouldn’t be fair now would it.

First, your going to reamortize or redo the loan for the new length of the mortgage. The negative is you could potentially pay more in interest for the lower rate. The fix to that is to continue making the old payments and pay off the loan sooner. If your monthly payment savings are substantial, you could potentially pay off your loan much sooner than if your payments were lower.

Second, if the mortgage you are refinancing is a purchase mortgage, or you used the loan to purchase the house, your mortgage now becomes a recourse loan. Some states, California is the only one that comes to mind right now, do not allow the lender to come after you for any difference between the auction price of your house if you are foreclosed and the amount you owe. If however, you refinance the loan, it now becomes a recourse loan and the lender, in this case Chase, can come after you for the difference between what they auctioned the house for and what you owed.

In simple terms, if you owe $100,000 on your loan, and they auction your house for $75,000, the lender can then come after you for the $25,000 difference.

The Chase Rate Reduction Program has the following conditions:

* you are employed and/or have a steady source of income along with sufficient assets to close on your new loan
* you do not currently have a second lien mortgage held by a company other than Chase (other options are available if you have a second lien mortgage at another financial institution - call us for details)
* you have no bankruptcy, foreclosure, judgments or liens
* borrowers on the new loan should remain the same as the original loan (some changes in borrowers are allowed with the new mortgage, call if you have questions)
* your property is a detached single-family residence (other options are available for co-ops and condos - call us for details)
* your property is not held in trust
* you current mortgage loan does not have mortgage insurance
* there is a net benefit to you such as reduced principal and interest payment, a lower rate, or converting to a more stable product (such as moving from an adjustable rate to a fixed rate)
* you will sign the required closing documents

Folks with Chase mortgages, there you have it. I’m fairly certain this is applicable Nationwide so go forth and take advantage of a good deal if you can.

I’d like to hear back from you if you’ve gone through the program and hear about your experiences. Just add comments below.

No Closing Cost Mortgages from Provident Funding

Folks, while Provident Funding does not offer a no closing cost mortgage per se, they present you a rate sheet of the rates and allow you to pick, in effect, the amount of closing costs you want to pay, regardless if it’s $0, or the whole kit and caboodle.

A little about Provident Funding, they are a lending institution out of Burlingame, California; and are also know as Provident Funding L.P. They loan in what appears to be the contiguous 48 states which excludes Alaska and Hawaii. They loan direct to you and me, the consumer, but they also loan through mortgage brokers as well through their mortgage wholesale section. While I am no mortgage ‘insider’, they claim on their website that they are the 10th largest wholesale lender in the US and service over $25 billion in loans.

You can go to their website and see what kind of mortgage interest rate you qualify for by running your numbers through their ‘Advanced Calculator’ option on their website to see what kind of rates you may qualify for. You will get a wide range of rates with the rates on the top being the lowest rates you can get by paying closing costs or buying points. As I write this, the lowest rate for my state is 4.25%, but that will cost you regular closing costs AND 3.125% in points. You could go all the way up to 5.5% for your mortgage rate and get a no closing cost mortgage, which is labeled as ‘No NRCC.’

What does ‘No NRCC’ mean? Well, it means that for that interest rate, there are ‘No Non-Recurring Closing Costs’ associated with that interest rate. Or, what I like to refer as a no closing cost mortgage. Now, if you are paying real estate taxes or insurance, that is not considered NRCC because you will always those costs year in and year out.

Funding fees however, title fees, mailing costs, lawyer fees, whatever however, that you only pay in the course of getting your mortgage is covered under the ‘No NRCC’ option which is what this website is about. We want no closing cost mortgages because they allow the most flexibility to us as the consumer.

I’ll restate it like I have in the past, BUT, if you are moving into your forever house, then you may look into paying closing cost and even potentially purchasing points to get that lower interest rate, but if you are like most Americans, you won’t be living in your forever house and will move in short order, so it would be best to get a no closing cost mortgage if it is less than three years as I pointed out in a previous post with the analysis.

If you decide to go with the ‘No NRCC’ option however, you do also have the option of taking a bit lower rate for just a tad bit in closing costs. For instance, looking at my situation, if I wanted to pay no closing costs, I would be looking at a interest rate of 5.5%. If however, I paid $145.40 in closing costs, I could get the one lower interest rate of 5.375%. Heck, looks to me like I could potentially get 5.25% for only $290.81. Sounds like I need to give Provident a call and look at refinancing my mortgage again from when I refinanced with Wells Fargo back in April. While I will admit that will re-amortize my mortgage, it will save me about $22 a month, or $264 a year. Not a large sum of money I will admit, BUT, that is money in my pocket today which is what I am after, cash flow today. If however, you want to pay off your mortgage as quickly as possible, then you may want to pay it off quicker, or with larger payments. BUT, you could refinance, apply the payment savings to your mortgage, AND add in the payments you were making.

Let me illustrate, and I’m using round numbers again because that’s how I operate, my brain is simple although randomly it will do semi-complex numbers, but we’re keeping it easy today.

If my mortgage is $1,000 a month right now. If I refinanced, I could potentially save $150 a month at a lower interest rate, but make payments for 30 years from the day my mortgage closed again. Well, I could keep making payments of $1,000 and pay my mortgage off that much quicker, less than 30 years because I’m making more than the required payment. And you’ll pay less in interest over the life of your mortgage.

Provident Funding charges a $1,099 funding/commitment fee to do a loan for you. This fee is flat and does not adjust like it would if they charged a 1% fee like many mortgage brokers do. If we divided the $1099 fee by 1%, we get $109,900. If your mortgage is $109,900 or less, the fee would be the equivalent of paying a 1% funding fee. If however, your mortgage is larger than $109,900, that is when you start saving money over going with a traditional mortgage broker that charges a 1% funding fee. If your mortgage amount is $200,000, Provident Funding Mortgage will still only charge you $1,099. If you go with a mortgage broker however that charges you 1%, then you’ll pay $2,000. You can see that you’ll pay $901 more to a broker over directly going with Provident Funding.

Why am I talking about Provident Funding though and what do I know about them? Before I refinanced my mortgage with Wells Fargo, I had refinanced prior to that with Provident Funding with a conventional 30 year mortgage. It has been some time, so the statements I am about to make are from my memory which may or may not be accurate.

They were easy to deal with and my mortgage refinance went relatively painlessly except for the issue in which I asked to close with one group and they tried to close with a notary. While I would probably go that route NOW, I didn’t then and my mortgage closing had to be rescheduled until the people I wanted to close with could get the documents and close.

Otherwise, the application process, lock process, everything was pretty painless. My processor was responsive and was pleasant to deal with. I unfortunately don’t know if she still works for Provident Funding, but she was all right to deal with. Another thing that I enjoyed about Provident is the fact that in the five years they held my mortgage, then NEVER sold my mortgage. I always made my payments to them the loan was never sold.

Because of this reason however, Provident may be a little bit more conservative in their lending criteria, so unless you have awesome credit and a stable income, they may or may not be the lender to go to.

If I remember correctly, from application to closing took me about two months which isn’t out of the ordinary, I believe it’s about average as far as mortgage refinancing goes.

While visiting their website, they are associated with a bank now out of Colorado and are offering a high yield savings account currently running 1.7%. For a savings account with no minimums, that is a respectable rate. Even Ally bank where you see those funny commercials on TV about the restrictions and no fees, is running a lower interest rate than Colorado Federal Savings Bank.

Enough about Provident, post your experiences with them if you have them or are looking at using them. I’d be interested to hear what you have to say about them and see if they are still right for me to refinance with. I will of course be calling them to inquire further on the rates.

Speaking of rates though, they have gone down a bit recently and if you have a no closing cost mortgage, you may be looking to refinance again to lower your mortgage amount.

Teachers Federal Credit Union No Closing Cost Mortgage

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:

1. a. Online Mortgage Application

   OR

   b. Fannie Mae 1003 Mortgage Application

2. Borrowers Authorization
3. Acknowledgement of Lock-in Options
   • Unrelated borrowers must fill out separate applications on items 1-3.
4. Floating Rate Agreement
5. $425.00 non-refundable application fee.
6. 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.
7. Copy of Deed - REFINANCE ONLY
8. Copy of Guarantee Survey - REFINANCE ONLY
9. Certificate of Occupancy for all structures and improvements - REFINANCE ONLY
10. 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.

$225.00 Application Fee

Completed FNMA 1003 application OR Submit our Online Mortgage Application

Signed Floating Rate Agreement

Signed Lock-In Option Acknowledgment

Signed Borrowers Authorization

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.

Update to Wells Fargo's No Closing Cost Mortgage

Folks, I called Wells Fargo tonight because mortgage interest rates have fallen again and just wanted to see what the rate on the no closing cost option was, because after all, I can seeing as how I have no skin in the game in regards to closing costs, and I was told that Wells Fargo did away with their no closing cost mortgage program, the internal program they used to offer.

The only available option left for a no closing cost mortgage through Wells Fargo is the "Home Affordable Refinance" program that was instituted to help out underwater home owners. This program appears to be tied to the federal government and is one of the many programs they have going trying to help out home owners. This does not appear to be a mortgage modification program, but instead a straight up refinance program, but you don't have to pay any closing costs for this program. To determine if you qualify for this program, visit the eligibility questionnaire to see if you qualify.

While I am disappointed that this program is no longer available via Wells Fargo, there are other lenders out there that offer similar programs, like the option offered from Fremont Bank and other banking institutions. My goal with this website is to find those lending institutions and highlight the program highlights so that people can easily find lenders that offer these programs. If you know of a program, let me know so we can spread the word.

UPDATE: After further 'investigation' on my part, it appears that the program is still alive and well. They have just tightened the requirements to qualify for this program. You just need to call them and find out what those requirements are and see if you qualify.

Is a no closing cost mortgage right for you?

In short, a no closing cost mortgage depends on your situation. It depends on a number of factors which I will discuss in this article.

Currently, due to the economic situation that we find ourselves in, a no closing cost mortgage option is tough to find and rare depending on the lender that you choose, because of that, you will have probably have to ask a number of different lenders on options they may be able to provide you.

First off, let's define a no closing cost mortgage. This is when you either purchase or refinance an existing mortgage, and all you have to bring to the closing table is yourself and some identification, the closing person will more than likely give you a pen to use. You don't write a check to the closing company, you don't give cash, nothing. This is also applicable to a no closing cost mortgage refinance.

What a no closing cost mortgage is not is where you have to pay for your closing costs, OR, your mortgage amount goes up because your closing costs are rolled into your mortgage. What I mean by that is if you have are taking out a $100,000 mortgage, your balance will still be $100,000 once the closing takes place, plus the interest for the month if you are skipping a mortgage payment.

Why am I taking the time to ensure that I define a no closing cost mortgage? Because, unfortunately, too many people, to include lenders and brokers, think that when you ask for a no closing cost mortgage, you are asking to roll your closing costs into your loan amount. This is not what I discuss on this blog. Why? Because when you do that, you are going to pay interest on the closing cost for the length of your loan. If your mortgage term is 30 years, you will then pay approximately three times the principal amount in interest therefore, potentially negating any interest savings. Granted, there are other factors to look at, for instance inflation, BUT, that is not what a no closing cost mortgage is.

If you plan on staying in your house for a good long time however, then you would actually want to pay closing costs to take advantage of the lower interest rate for a longer period of time. If however, you are like most Americans, you will probably move in short order, approximately every six years, and sell your house and buy another house. In this case, you don't want to pay closing costs because it does not make sense. Not to mention the fact that if you do sell your house, your savings will be dimished and you will probably spend more money that you would have if you had refinanced with a no closing cost mortgage. What this also allows you to do is to refinance at will if interest rates drop as they have been doing lately.

For instance, let's look at a couple of scenarios based on today's interest rates.

If you take out a 5% mortgage and pay customary closing costs, your closing costs will be approximately 2% of the loan amount depending on where you live. Based on a $200,000 mortgage, you are looking at the following numbers:

Year	1	2	3	4	5
Closing Costs	$4,000	$4,000	$4,000	$4,000	$4,000
Payment	$1,073.64	$1,073.64	$1,073.64	$1,073.64	$1,073.64
Total Interest Paid	$9,932.99	$19,715.01	$29,338.35	$38,794.87	$48,076.06
Total Cost	$13,932.99	$23,715.01	$33,338.35	$42,794.87	$52,076.06

If however, you don't move, or if you take a mortgage with no closing costs, the interest rate averages approximately 0.5% more than if you were paying closing costs. Based on a 5.5% interest rate, your costs will break down as follows:

Year	1	2	3	4	5
Closing Costs	$0	$0	$0	$0	$0
Payment	$1,135.58	$1,135.58	$1,135.58	$1,135.58	$1,135.58
Total Interest Paid	$10,932.76	$21,713.54	$32,333.78	$42,784.42	$53,055.89
Total Cost	$10,932.76	$21,713.54	$32,333.78	$42,784.42	$53,055.89

Using our skills of deduction, we can see that the no closing cost option wins out until sometime during year five as the interest paid column is your total cost paid at the end of that particular year.

Seeing how we Americans move every six years, it’s a toss up in regards to taking a no closing cost mortgage option or paying closing costs. During year six, paying closing costs overtakes the no closing cost option by approximately $2,000, not a figure to sneeze at in my opinion. You do also however have to take into account how that $2,000 is worth less due to inflation and how you could potentially invest that $2,000 and make it worth much more by not paying closing cost. If you are disciplined with your money, I would argue that it would make sense to take the no closing cost option if you plan on living in the house for six years or less. If however, you will be moving in six years or less, then a no closing cost option would be the best method to finance your mortgage. This of course does not take into account a serial refinancer every time the interest rates drop and you are able to take advantage of the new lower interest rate.

Something to take note of also is the fact that as your loan matures, i.e. you’ve been making monthly payments on it for some, your loan principal will decrease. Once you get too far into the loan, your total interest expense, i.e. the amount of interest you will have paid on your mortgage will be more than if you had kept the original mortgage in place. If you are however unphased by that, because it can be in the thousands of dollars, then go with the no closing cost mortgage option. For me, I will refinance because it helps with the cash flow and doesn’t cost me anything other than some time to sign the closing documents.

The biggest determinant to decide on whether to go with a no closing cost mortgage option versus paying closing costs is to look at how likely you are to be in your house for six years or longer. Once that is figured out, you should then be able to figure out if the no cost mortgage is the best way to go.

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.

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.