Last but not least, the idea of a no-cost loan permeates me to the core…back to suspending reality and going for a solution that may be more expensive than the everyday solution. What people really are asked to believe is that not only are we not making any money on the loan, but we are actually losing money to pay your costs for you. And believe it or not, people accept that premise. How long could any company last under that premise?
I know a lot of people think the costs are superficial and really don't exist, but have you ever seen the size of a title company's buildings? Do you know real estate appraisers who live in abstract poverty? Do credit companies perform a public service without any compensation?
If you really believe there isn't any cost or profit, then who pays for the underwriting and processing of the loan? I haven't seen anyone working in the document department who doesn't get paid to produce a set of documents for your signature. Heck, even the notary makes money to attest to your signature.
Do you work for free? If so how did you qualify for the loan?
The main way these companies operate that offer the "no-cost loan" is simply raising the rate to a point where the rebate is big enough to pay the costs and make a profit. Your no-cost scenario is being paid for with a higher rate for as long as you have the loan.
I could go on for a lot longer, but I do not wish to be redundant. People do what they have to and maybe some day they will begin to do what they need to, but for the most part it isn't happening yet. Hopefully it will, but even if it doesn't, I will keep making suggestions that help. They may not be the absolute best, but generally better than they are doing now.
Roger Schlesinger's Mortgage Minute is heard on hundreds of radio stations and daily on the Hugh Hewitt radio show and Michael Medved shows. Roger interacts with his hosts and explores the complicated financial markets in order to enlighten his listeners and direct them along their own unique road to financial freedom. Roger is the President and founder of Manhattan West Mortgage.