Back in May I brought up Bank of America's No-Fee Mortgage offering, which claims no loan origination fees, or closing fees and no PMI for those with less than 20% down payments. I didn't know if it was overall cheaper, but I liked the idea of having a better idea up front on total costs, and I asked for feedback from those who've done it. In the time since then, comments have trickled in here and there, so I thought I'd give the comments a post of their own. I can't vouch for whether these comments are honest or they are planted by people who work for Bank of America or a competitor, so of course take that into consideration.

Without further ado, here's what they said...

Marc Brinitzer:

Better check your rate closely folks. You're paying for this somewhere, if not in the fees, then in a much higher rate than you would otherwise be entitled to. If higher monthly payments are better for you than paying fees up front, then do it. Just be aware, nothing's free. You WILL pay.

adam:

Nothing is for free-that is correct. I have studied this offer in depth (I am a competitor) and the GFE I have in hand looks attractive. the problem is they require you to pay some discount points and dont give you the rate one could get paying those points on a traditional scenario. They waive $2500 of stuff and collect 1.25 points. No MI? Everyone has that ..its called Lender Paid MI and they will jack up the rate accordingly. This is a real disservice as MI is now tax deductible for most people. You also have to have a B of A account and probably an auto-pay feature.
At my company, I am running the same promotion personally. its not difficult to match them...its all in the packaging.

Marco:

300,000.00 Mortgage. 15 Year Term. 5.25% with 2 Discount Points. Only $6K in total fees. We expected to spend closer to 9K. Bank of America is going to put a lot of companies out of business. The program is AMAZING!! No Auto Pay Feature.

Dan:

I just closed a house with one of these mortgages, and there were truly no fees. It was a refreshing and wonderful experience! Their rates were also a quarter-point lower than anyone else's. I'm not sure how or why they're doing it, but it is as good as it sounds.

Wally:

Because I'm a mortgage broker, I've been getting an earful about the BoA "No Fee Mortgage Plus" product. So I did a bit of surfing and here's what I found...When asked about the no-fee mortgage program, Floyd Robinson, Bank of America's president of consumer real estate and insurance services said, "this is about a relationship more so than about a single product sell. We are here to build relationships, to become the trusted adviser for the customer." Bank officials say they typically are able to cross-sell 5.3 additional products for every mortgage customer.

Over the last few years, the company has tried hard to land new investment banking and trading clients. That helped the company increase its service fee and investment banking income. The two drove non-interest income at the bank up 10.1%, to $9.8 billion, from $8.9 billion a year ago. Now you know how they plan to recover the lost revenue from all of the "No Fee" mortgages they originate.

Jane:

I've found that the rates with Bank of America are about .30 higher then others. I checked in early May and mid June and both times the rates were about the same hike. But since we are only putting 5% down the overall monthly payments were the same as other lenders minus the 5k of closing costs. As far as being approved they didn't require anything during the application process that other lenders asked.

Homebuyer:

I just got my quote from the local BOA today for this loan. I may not be their target customer, because I am putting down >20% on my house, but their no-fee option results in higher points for the same rate, so there is a catch. For example, I was quoted the following for a 30yr fixed with I/O option: 6.625 interest rate with 1.91 points (and with an extra $3337 in closing costs) versus 6.625 interest rate with 2.602 points and discounted the $3337 in extra closing costs. In addition, those rates cost 1 point more (=.25% higher interest rate) than what I found through my mortgage broker. FYI.

True Scenario (not his real name):

8/30/07 - NJ first time home buyer loan for $300,000.00 with 800 credit score, checking and savings account with Bank of America... quoted 6.75% on a 30 year fixed rate mortgage with first 10 years interest only, next 20 years principle & interest paying .863 points with only 10% down. Could I find a better loan? Yes, slightly (6.65?). But let's do the math.... closing costs from a broker were estimated at $4,800 without paying any points. So, I pay $2,589 in points but not closing costs (save almost $2,300 there). PMI will cost me $130 per month with a standard loan.... Bank of America saves me $1,560 a year right there. You would need to find a rate of less than 6.1% to be comparable just in PMI savings. Let's have some fun with this comparing apples to apples.... IF I could find a loan for 6.5% with the same terms (30 years, $300,000 loan, PMI, NO POINTS) it would cost me $2,026.20 per month whereas Bank of America @ 6.75% with no PMI costs me $1,945.79 per month. Savings of $80.41 per month or $964.92 a year or $9,649.20 for the first 10 years (time to buy a new home and move again :) ) Going to use the original $2,300 savings in closing costs/point charge to pay half of the first year's property tax, woohoo!

Tim in Tucson:

So I have finally just finished the process with BofA here in Tucson and purchased our first home. We only had a 3 week window to close and let me tell you everything went so smooth. I called my Lendor every other day because I was thinking there was some "catch" and I was going to get screwed somewhere and I was thinking this is too good to be true. The only thing I noticed is: you will pay a slightly higher interest rate then what the market is saying, but no fees at closing is true and we ended up paying $200 less at signing then what he gave us in my Good Faith Estimate. No other lendor could match what they gave me and most of all there REALLY IS NO PMI. I'm a very satisfied customer of BofA's program.

Overall pretty much a thumbs-up from those who've used the program. I'll have to check it out if I'm ever in the market again.