Are closing costs good or bad?

It depends.

Due to some very slick marketing by the mortgage industry, many people know that “closing costs are bad” and that they don’t want to pay them. They aren’t exactly who is going to pay them, but they know that they don’t want to.

Here is an ad that I came across from Countrywide.

Does this add say “no closing costs”?

No.

It says “No Cash Required For Closing Costs.” – or in other words – there are closing costs and you are going to pay them, but they can be rolled in to your loan.

Hence the term “no out of pocket closing costs”.

The interchangeability of the two terms can be confusing, I realize this. But I just thought I would go on record as saying:

You can pay your closing costs or the seller can pay your closing costs. If you want the lender to pay your closing costs, be ready for a higher than market rate – because in exchange for paying your closing costs, the lender will require a higher interest rate.

Oh, and I rarely if ever see people bringing money for closing costs on a refinance – they are almost always rolled into the loan.

Is it better to pay your closing costs and have the rolled into your loan or is it better to get the bank to pay your closing costs for you in exchange for a higher interest rate?

It depends.

Make sure that when you speak with a loan officer about your situation, you ask them that question.

Justin McHood is a nationally published mortgage expert who lives and works right here in Arizona. You will normally find him wearing a blue starched shirt (he says that it goes well with is orange hair) and you can learn more about him at ArizonaMortgageTeam.com