Financing in Pennsylvania>Question Details

Danielle, Home Buyer in Pennsylvania

Is Bank of America's "No fee mortgage plus" too good to be true?

Asked by Danielle, Pennsylvania Fri Mar 28, 2008

It says that there are $0 application and closing fees and NO private mortgage insurance. How can this be? I am just starting the mortgage search and will only be putting 10% down, which normally means I will have to pay PMI. How could there be no PMI at Bank of America?

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Bankof America is Cherry picking only the finest of loan applications because they can. To be eligible you have to put down at least 10% and have a credit score greater than 720 and the debt to income ration has to be around 36% total. They will increase the interest rate to make up for some of their fees, but since they are my competition i do know thatsometimes they are giving the part of the house away. As a mortgage banker myself the fees form my bank depending on the type of loan total no more than $717, to buy out the mortgage insurance there is a cost of .0025% so it is feasible Danielle.
2 votes Thank Flag Link Fri Mar 28, 2008
in order to test the claim I tried getting the prequalified letter for mortagge of $100,000 with 10% down. I have a very good credit history 790. I compared the interest available with wellsfargo and geo mortagage (geomtg.com) lender and amerisave online. To test BOA came out to be the best. I got the prequalified certificate for No fee mortgage plus program with BOA which is valid until June 2009. I amd still trying to digest or comprehend the marketing strategy. Probably price for these services are going down or BOA huge asset base is helping to catch new buyers. I believe this program is only for first time owner occupant and you have to have some kind of account with BOA. I have one credit card with MBNA now with BOA. I don't have any saving or checking acct with BOA. If anyone can get better rates with 4.5% with no lender and title fees with 0.375 point or 4.75 with no points, let me know. I can try that bank or lender for comparison.
1 vote Thank Flag Link Sun Mar 29, 2009
Danielle,

Unless Bank of America is putting you into a Non-Conventional Loan (also known as Sub-Prime)....there is PMI with only 10% down. While it may not be seen as a payment per se, they will build it into the rate...thus a higher rate. As far as no fee mortgage loans, no closing costs loans, etc.....always remember Mortgage Companies & Lenders aren't Non-Profit Organizations. They are making their money somewhere and with these loans, it will equate to a higher interest rate. Depending upon how long you plan on staying in the home, would be one of the major determining factors in if this is the best program for you.
1 vote Thank Flag Link Wed Apr 2, 2008
Hi Danielle:
When mortgage companies don't charge points and fees they may either build them into a higher percentage rate or back end the costs to you at closing. If you are taking out a $300,000 loan and told to bring nothing to the closing :) look to see that your loan is not actually $310,000 with the $10,000 in actual closing costs built in :( . It's hard to know rates spreads and what you are actually getting is a good deal because it all depends on your credit scores and other variables. You should check with 2 or 3 lenders to compare apples to apples. Good luck with your mortgage hunting.
Sandra Bolcar
RE/MAX VILLAGE SQUARE
973-744-7722
sandra@thecrosskeysteam.com
1 vote Thank Flag Link Fri Mar 28, 2008
this will mean the bank will pay the PMI via a lump sum at origination LPMI (lender paid mortgage insurance) which does not have to be revealed during processing. LPMI stays on the loan for it entire life and cannot be removed. so refi will have to go through BOA
0 votes Thank Flag Link Fri Dec 28, 2012
Follow up to my previous post. After some investigation, the situation is not as bad as posted. I discovered the following history.

http://www.housingwire.com/2009/12/23/bofa-sues-mgic-over-un…

It appears the private investigator is only looking for evidence to not pay the PMI claim which BOA made on my mortgage. MGIC is who covers all of BOA's "No Fee Mortgage Plus" loans, at least up until recently. They try to find loan inconsistencies as grounds to reject the claim. I am informed by my attorney that I have no obligation to talk to these private investigators. All evidence is the MGIC's business plan involves battling these claims aggressively and not paying them, even if it means losing BoA's business.
0 votes Thank Flag Link Sun Oct 10, 2010
To Jen, I am also having the same problem with bank of america no fee mortgage. I am trying to refinance with a lower rate but just found out that I can because of this lender paid PMI that they never told me. So have you done anything about his? Please post bacvice.k. I am looking in to sueing the BOM over this. If I can not refinance because of this then I will looking in getting a lawyers ad
0 votes Thank Flag Link Sat Oct 9, 2010
We bought a house in 2007 under the No Fee Mortgage plus plan in Arizona and really had no closing costs or fees. We also put no money down and ended up paying about $600 out of pocket to close. We were told there was no PMI. I was laid off in 2008 and my Buyer Protection plan kicked in and expired 6 months later when I still didn't have a job and was then on unemployment. We after many trials and tribulations with BOA got a short sale approved and moved out of the house to search for work in another state.

During the short sale it became clear that there was mortgage insurance hidden in somewhere as even BOA negotiator said "of course there is PMI, you put no money down". HA HA. BOA are liars of course. Who expected less. Now, five months after the short sale closed, I am under investigation by a private investigative firm hired by the Mortgage Insurance company. They started by trying to get permission to verify previous tax returns through my tax accountant. Now they want to meet and talk to me. Lawyer representation looks like a reasonable course of action at this stage.

Any other experience from other "BOA's No fee NO PMI loan foks out there?

I guess that answers the question, eh?
0 votes Thank Flag Link Sat Sep 25, 2010
Its crap its a lie. We bought our home in 2007 under the same program and only went with BOA because of the no PMI. After we closed on our home a year later I wanted to refinance. I was told that we are paying mortgage insurance that was put on our loan by the Lender. I quickly realized that the program was a fraud. We are paying mortgage insurance and we are stuck with a rate of 6.75% because of it and can't refinance to take advantage of the lower rates now available. They say you don't pay PMI but what is the difference between PMI and MI. Its a scam I need help getting out of this.
0 votes Thank Flag Link Wed Sep 16, 2009
We bought our house in NY in 2008 with the BOA no closing fee mortgage. We put down only 5% which was what they advertised. We locked in at 5.5% for a fixed rate 30 year mortgage. BOA paid all of the closing fees, our attorney, surveyor and everything else they said they would do. We also were waiting for the "oh it doesnt include that but it never came" The only thing we had to pay was NYS tax . They did not have to send a lawyer to the closing and did all paperwork via fax at the closing. I thought they were fabulous. We have been in our house for 1.5 years and also do not have PMI. THe only BS that I thought occured at the closing was when we were asked to tip the processor...
0 votes Thank Flag Link Thu Aug 13, 2009
Danielle,

I have to agree. You need to look at the loan documents yourself. This is what happened to people that "didn't know" their ARM was going to reset or that putting down less than 20% was risky.
0 votes Thank Flag Link Fri Apr 10, 2009
I really hate how you highschool drop-out realtors give your opinions without knowing the answer. If you don't know the details of this specific loan you should keep your opinion to yourself and let the people who have first hand knowledge give there information. Your OPINION is worthless and should not be made to sound like FACT. Phrases like "all banks do . . ." or "When most companies do this. . ." or "Everybody else . . ." are phrases that indicate that you have no first hand knowledge and do not know the answer to the question posed.
0 votes Thank Flag Link Fri Apr 10, 2009
Danielle,

No fee mortgages translate to a higher rate, that's the bottom line. Everybody makes money on loans, it's a matter of what your goals are in whether a 'No Fee Mortgage' makes sense for you. Also, bear in mind that to get the best rates the Market has to offer, PMI is mandated when you are borrowing over 80% of the Sales Price. Let me know if you have further questions.

Regards,

Jason
0 votes Thank Flag Link Fri May 30, 2008
Yes... there is no such thing as a no cost mortgage. They just raise the rates to make up for the closing costs. It is an insulting offer.
Web Reference: http://getprequalified.com
0 votes Thank Flag Link Sun May 18, 2008
It can be a great deal if you meet the qualifications as described below. In general, if you purchase a mortgage at a slightly higher interest rate to build in the closing costs, in approximately 5 years the difference between slightly higher payments or upfront closing costs and lower payments will be equal. Thus, determining how long you are likely to live in the home may help your decision. Make sure you also compare to an FHA loan to decide which product is best for you!

Rebecca Ivanov, Helen Adams Realty, Charlotte NC
0 votes Thank Flag Link Fri Mar 28, 2008
if you must buy now
wait for interest rates to drop later this year

anyways

good luck
0 votes Thank Flag Link Fri Mar 28, 2008
I used the Bank of America no closing cost loan.... it was great. You will still have to pay prepaids and escrow, and may attorney costs... but it is a very nice loan.
Web Reference: http://www.queencitygal.com
0 votes Thank Flag Link Fri Mar 28, 2008
Danielle,
Great Question! You already have received 3 GOOD answers that address it well. Thanks for writing such a great qestion that will be helpful too many people.
This is the kind of interaction that Trulia wa designed for.
0 votes Thank Flag Link Fri Mar 28, 2008
Danielle,

Bank of America is a huge corporation with a massive advertising budget. This catchy phrase is designed to get you talking about it, interested and ultimately sitting in a local branch signing loan papers. There will certainly be closing fees, such as title insurance, attorney, appraisal, taxes and the like. They are probably not charging an underwriting fee which typically is around $700. By increasing the actual interest rate on the loan BofA is offering you what is called "lender paid mortgage insurance". Both PMI and lender paid MI can be tax deductible (ask an accountant), the difference is PMI can be removed once the value of your home is greater than 80% of the outstanding balance of the loan.

There's no such thing as a free lunch!!! YOU always pay for it somewhere.
Web Reference: http://www.guardhill.com
0 votes Thank Flag Link Fri Mar 28, 2008
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