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No Point, No Fee | Fixed Rate Loans | Variable-Rate Loans (ARMs)

No-Point, No-Fee Loans

On most of the loans we offer, you may choose higher up-front fees for a lower rate, or vice-versa. In other words, you may choose a lower interest rate by accepting higher points. You might get the same loan at, for example, X - 0.4% and Y + 0.5 points; the relationship varies daily, so it is not always a consistent ratio.

If you wish to pay less in up-front fees, we can offer you that too, by increasing the interest rate. At some point the lender will actually pay part or all of our fees; if they pay all of our fees, it is a no-points loan.

With some but not all programs, when the rate gets high enough the "rebate," as it is called, from the lender may get high enough to pay for our fees plus all of your closing costs. Thus, a "no-point, no-fee loan." On a 30-year fixed-rate mortgage, this might be at an interest rate 1.25% to 2% higher than the same loan at full cost plus two points, so it's not really a no-cost loan.

Advantages: No costs at all up front, though we do collect appraisal and credit-report fees up front and refund them in escrow.

Disadvantages: Higher interest rate on the loan.

When it is a good idea:
· (In case of a purchase) When you have very little to put down, but your income is sufficient.
· (In case of a refinance) When you do not have the cash to pay the costs up front, or the equity to finance them.
· If you think you will keep the loan only a year or so. In general, it takes at least two years on most loans to recapture the
· Up-front costs of a two-point loan, and might take six or seven years.

 

 
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