Borrowers who take out mortgage loans with no closing costs won't need to bring as much cash to the closing table. This is especially beneficial to homeowners who have a high enough gross monthly income to afford their monthly mortgage payments but not enough liquid cash on hand to pay both their down payment and closing costs. Closing costs are not inexpensive. The 2009 closing costs survey conducted by Bankrate shows that the average borrower who took out a $200,000 mortgage loan in 2009 paid $2,732 for these fees.
Down payments are a significant financial hurdle to many homeowners. Today, most conventional mortgage lenders require home buyers to provide a down payment of 10 percent to 20 percent of a home's final purchase price. That's a lot of money for many people to come up with. Scraping together this much money is even more difficult for borrowers who pay thousands of dollars in closing costs, too. Homebuyers who take out loans with no closing costs, though, will have more cash available for a down payment helping them to get into a larger, more expensive home. Many borrowers can afford the monthly mortgage payments of a costlier home, but don't have the lump sum of cash on hand to afford both closing costs and a down payment.
By not paying closing costs, borrowers can use the money they save to purchase other necessary items. Many buyers, especially first-time buyers, come to their new homes with little furniture. Others are faced with the expense of having to buy appliances such as washers, dryers and refrigerators. By not spending money on closing costs, these new homeowners gain some extra spending money to help furnish their newly purchased residences.