When Does a Loan Have no Closing Costs?

Loan closing costs are a major portion of the loan and should not be ignored. As such an important part of the loan, many borrowers look for loans that do not have closing costs attached. While you may be able to find loans that do not have closing costs, there are a few things that you should realize about "no closing cost" loans. 

Built In

The first thing that you need to realize is that lenders are always going to get their money one way or another. They are never just going to give you thousand of dollars in order to get your business. If they tell you that a loan has no closing costs, what they really mean is that they just bundled it into the cost of the loan. You will be paying for that cost one way or another. Most of the time, your mortgage is sold off to someone else to service. Therefore, the closing costs are how mortgage brokers and banks usually make their cut of the money. 

In order to do this, lenders will sometimes roll the closing costs into the price of the loan. They may also just raise the percentage that you are paying for the loan.