Solano Real Estate Scene: No fees, no cost; no way

Why would anyone pay a 4.9% interest rate on a car loan through their credit union when they could get a 0% rate through the automobile manufacturer? Why would a borrower pay points and fees for a home loan when they might be able to get a mortgage with little or no fees? Why would anyone in their right mind pass up a 0% interest rate or not jump on a no-fees mortgage? There is no free lunch and there is no such thing as a free loan at zero cost unless it is a loan from Mom and Dad or Grandma and Grandpa. Automobile companies will often carry financing at a 0% interest rate if you pay the retail car price required to obtain the zero rate. They will occasionally give the buyer a promotional option like a $2,000 rebate or discount off the retail price or a 0% interest rate on the financing for qualified buyers. This is simply brilliant and captivating advertising. Banks, credit unions and mortgage companies offer mortgage loans to qualified borrowers with zero points and fees. Occasionally we hear radio and see TV advertising about no points and no fees that is borderline misleading and false as if their mortgage is free or better than their competitors. This is a lie. The only reason a sane person would or should pay points and fees is to get a better rate. All mortgage lenders offer loans with zero points and low or no fees to qualified borrowers (usually for folks with high FICO scores), but the rate is always higher with that lender than the loan that same lender offers with points and fees. Lenders want the phone to ring and no points and fees sounds good, but all credit unions, banks and mortgage companies offer their members and clients the opportunity to obtain a lower rate than the no points offering. APR (annual percentage rate) disclosure is required by law. A residential mortgage lender is required to disclose the total loan cost determined by the interest rate and the lender fees over the term of the loan. For example: If a borrower obtains a loan at 12% for one year with absolutely no fees or prepaid interest, the APR would be 12%. If that same borrower were to obtain a loan at 10% for one year with a 2% loan fee, the APR would also be 12%. If the borrower were offered 12% for two years with no fees, the APR would be 12%, however if this borrower were to obtain the two-year loan at 10% with a 2% loan fee, the APR would be 11%. In other words, if the borrower took the full two years to pay off the loan, he or she would pay less total cost than the no points and no fees loan at 12%. The key is the rate and the time it takes to recoup the closing costs. If it sounds too good to be true, it always is!