Financing in San Diego>Question Details

Dmoss, Home Buyer in San Diego, CA

B of A No Fee Mortgage Plus, Too Good to be True?

Asked by Dmoss, San Diego, CA Sat May 31, 2008

Is this program to good to be true?

Do they get you on the back end with higer interest rates than available on broker/wholesale market?

Any hidden fees?

Thanks for the advice.

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Answers

9
Anybody can offer you a "no fee" mortgage.

Mortgage brokers do it by crediting back to you their YSP (Yield Spread Premium) commission from the lender for committing you to a higher rate of interest.

Banks do it by using their SRP (Service Release Premium) commission from Fannie Mae or Freddie Mac for committing you to a higher interest rate.

The difference is Mortgage Brokers must have you agree in writing to the amount of the YSP being paid by the lender. Banks are 100% EXEMPT from even telling about rate hikes. Keep in mind that even at a bank's "most competitive" rate, they still set the rates high enough to earn SRP commissions from Fannie and Freddie. With a bank you have no way of knowing the actual rate for which you qualify. And most bank mortgage sales reps recieve the bulk of their commission from rate hikes.

Regardless, many closing costs aren't included in these offers. Setting up your escrow for taxes and insurance is one example. In states like Florida, escrow deposits can be your largest closing cost.

One other note: You cannot deduct closing costs on your income taxes if the closing costs aren't itemized. "No fee mortgages" remove this tax benefit from you. For a long term loan, the write off on the higher rate will by far exceed the amount of closing costs you can write off each year, so it's not an issue.

On a shot term note, or with investment properties, your CPA might recommend a lower interest carrying cost and paying fees to best fit your situation.
1 vote Thank Flag Link Fri Jun 27, 2008
I have been in the mortgage and real estate industry going on 25 years. I own both a real estate and a mortgage brokerage. One thing I assure you of, there is no free lunch(or in this case,loan). And B of A, in no way, is giving theirs away. The No/Point-No/Fee loan is nothing more than B of A raising their rate to create a bigger yield. It may benefit you if you are only in the property a short time. But you may very well be better off paying your fees,and getting the regular rate they offer. Be sure your B of A rep shows you both. B of A gets their moneny in the same fashion and in the same places as any other mortgage bank. So be very careful with your options. If you'd like more information or black/white answers, please don't hesitate to contact me. My information is below.
Web Reference: http://ffomes.net
1 vote Thank Flag Link Sun Jun 1, 2008
One of my great friends and my preferred lender works at B of A. Of course the bank has to make money, but there are no points (she gets paid based on volume) and the fees are minimal. We just closed an escrow Friday with minimal fees,no paperwork and a 5.875% NOT BAD!. I also have to point out that she answers her phone at all hours,always returns calls/emails and has closed every escrow we have done together in under 30 days. She is a phenomenal LO and doesn't mind answering questions. Email and ask her michelle.e.bennett@bankofamerica.com
Its great to be able to toot someone's horn other than my own ;)
1 vote Thank Flag Link Sun Jun 1, 2008
Hi,
They change the programs all the time but everywhere has to make money somewhere. The Truth in Lending Act requires that they give you all the info up front so that you can make an informed decision. Ask for the fees, interest rate, etc in writing and read it carefully. Many similar programs have fine print that says the fees are added to the principle amount. Don't be afraid to ask the direct questions of the loan officer. If they are making the interest over the life of the loan, they can afford to make it free up front, but as you said, check the interest rate too. As a realtor, the only problem we have with banks providing the loan is that they are usually salaried and not as motivated to close the loan quickly. You frequently don't have a designated person. With a commissioned loan officer, they are motivated to get everything done quickly and usually close on time. Hope this helps!
Diane Conaway, RE/MAX United, (760) 749-2888
1 vote Thank Flag Link Sat May 31, 2008
Dmoss,

Regardless of what a loan program is called, you want to shop APR's to make sure you are getting the best loan. The APR is the best way to calculate the total loan cost. Let me know if you have any specific questions that I can answer for you.

Regards,

Mark DeWitt
Bank of America Home Loans
San Diego, Ca.
858-212-7054
Mark.DeWitt@bankofamerica.com
0 votes Thank Flag Link Wed Jan 6, 2010
I am a first time homebuyer and just closed my loan with BOA No fee mortgage plus product. It was an incredible experience. We took about 50 online and over the phone quotes and no other lender even came close. I ran the numbers and we are ahead by atleast $ 4000 on the nearest competing product. I had a loan of $212,000 on a $240k purchase. I must admit they do sneak up on you on a couple of fronts , but in my experience still a very good and positive experience. Highly recommended specially if you are putting in less than 20% down payment. Good luck.
0 votes Thank Flag Link Tue Mar 17, 2009
If it sounds too good to be true, it always is. Banks have high overhead to pay for with retail loans. In my experience brokers can get better rates 4 out of 5 times.
0 votes Thank Flag Link Fri Jun 27, 2008
They just raise the rate to cover the fees. There is no such thing as a no fee mortgage. The personal banker in my BofA branch told me how they do it.
Web Reference: http://getprequalified.com
0 votes Thank Flag Link Sun Jun 1, 2008
I would try Michael Campanaro of Wells Fargo who can give you fees almost to the penny.
Web Reference: http://PBALoans.com
0 votes Thank Flag Link Sun Jun 1, 2008
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