Lender Credits Explained

No-Closing-Cost Mortgages – Are They Real?

Yes, they exist! Learn how lender credits work, when zero-closing-cost loans save you money, and the tradeoffs between paying upfront vs accepting a slightly higher rate.

The Bottom Line
No-closing-cost mortgages roll your closing costs into your interest rate. You pay $0 out-of-pocket at closing, but your rate is typically 0.25-0.50% higher. Best for short-term ownership or refinancing.
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Calculator and financial documents representing mortgage cost analysis

How No-Closing-Cost Mortgages Actually Work

Understanding lender credits and the real costs behind "zero closing cost" loans

Traditional Closing Costs

Typical Nevada closing costs range from 2-5% of the loan amount. On a $400,000 mortgage, that's $8,000-$20,000 in upfront fees including:

  • Origination fees ($1,200-$2,000)
  • Appraisal ($500-$700)
  • Title insurance & escrow ($1,500-$3,000)
  • Prepaid taxes and insurance
  • Credit report, underwriting, recording fees

No-Closing-Cost Option

With a no-closing-cost mortgage, your lender provides lender credits that cover most or all closing costs. The tradeoff:

  • $0 out-of-pocket at closing (or minimal)
  • Interest rate 0.25-0.50% higher
  • You pay more interest over the loan's lifetime

Example:

Instead of 6.5% rate + $10,000 closing costs, you get 6.75% rate + $0 closing costs. The lender covers your fees by charging a slightly higher rate.

Break-Even Analysis: When Does It Make Sense?

The key question: How long will you keep the mortgage? Here's how to calculate if no-closing-cost is right for you:

$75
Monthly Payment Difference
Higher monthly payment on no-cost option (example)
÷
Divided By
Closing costs saved upfront
= Months
Break-Even Point
$10,000 ÷ $75 = 133 months (11 years)

When No-Closing-Cost Loans Make Sense

Short-Term Ownership

Planning to sell or refinance within 3-5 years? You'll save money by avoiding upfront costs since you won't pay the higher rate long enough to offset savings.

Low Cash Reserves

Need to preserve cash for home improvements, emergency fund, or other investments? No-closing-cost keeps money in your pocket today.

Frequent Refinancers

If rates drop and you plan to refinance soon, no-closing-cost prevents you from paying thousands in fees twice within a few years.

Maximizing Down Payment

Want to put every dollar toward down payment to avoid PMI or get better rates? No-closing-cost frees up $10K+ for larger down payment.

When to Avoid No-Closing-Cost Loans

Long-Term Home Ownership
Staying 10+ years? You'll pay significantly more in interest over time than you saved on closing costs.
Have Adequate Cash
If you have cash reserves and plan to keep the loan 7+ years, paying closing costs upfront gets you a lower rate that saves more long-term.
Already High Rates
If rates are already elevated, adding another 0.50% makes your rate even less competitive and harder to refinance out of later.
Lower Credit Score
Already getting a higher rate due to credit? Adding more rate on top compounds the cost. Better to pay closing costs if possible.

Frequently Asked Questions

Ready to Explore Your Options?

We'll compare no-closing-cost vs. traditional loans side-by-side and help you choose the option that saves you the most money based on your timeline and financial situation.

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Related Resources:

Understanding Closing Costs • Refinance Calculator • Rate Lock Guide • Refinance Options