No catch! The rate on a no closing cost loan is slightly higher than the rate on a loan with closing costs.

Your loan will have an interest rate that is slightly higher than the rate available for a loan where you pay your costs and/or points. Because the loan has this higher interest rate the lender pays us a commission. We use this commission (called the yield spread premium) to pay all the costs including ourselves.

You are provided with a full "HUD 1" settlement statement showing a lender credit for all normal closing costs.

There is no catch, other than a slightly higher rate for these particular loans which generates a rebate for the lenders to use to pay the closing costs