According to USA Today, Bank of America will soon begin offering no-fee mortgages. That means they won’t charge for applications, appraisals, loan originations, title insurance, flood certifications, and even private mortgage insurance.
I was thinking about this last night, and it occurred to me that this is simply the next step in a pyramid scheme. Lenders have to attract an increasing number of buyers as foreclosures increase. While the lenders assumed the risk of the first batch of risky mortgages, they want to be bailed out by attracting more customers.
Don’t be fooled, the bank is not doing this out of the goodness of its heart. Bank of America admitted they won’t be offering the lowest rates for these mortgages. What they’re losing in fees (about $3,250 for each $200,000 loan) will be made up for in interest payments.
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{ 3 comments… read them below or add one }
Not worth it. If you take the value of the closing of $3,500 and put it as a down payment you save $5000 or so in interest (assuming they didn’t inflate the rate). Even an extra quarter percent in interest would put you on the bad end of the deal.
Whether or not this is a good deal presumably depends on how much you are planning to borrow. For example when I was shopping for my mortgage, I looked at the combination of fees and interest over the time period I’m likely to keep the house and/or mortgage and picked the lowest, which turned out to be neither the lowest fees nor the lowest interest rate.
I’m interested in the other side of this program…the $250 Best Value Guarantee. Has anyone recieved their check yet? I can’t see to get my check.
I applied for two loan programs (BOA and DHI), was accepted to both. DHI ended up offering the best value. I jumped through all of BOA’s hoops to get the $250 and still haven’t recieved the check. Anyone else having this issue?