Q: What about these ads for no-cost loans?

A: In many states, real estate regulatory agencies are cracking down on such advertising. The very term, "no-cost" loan, is misleading because borrowers are actually paying a higher interest rate in exchange for not having to pay fees or closing costs up front when the loan is secured.

A "no-points" loan is one for which the lender does not charge points (one point is equal to 1 percent of the loan amount). But there are other fees involved in no-point loans, as with most loans.

Q: Is there such a thing as a no-cost or no-fee loan?

A: No. While some lenders occasionally promote "no-cost" loans, banking regulators have cracked down on these misrepresentations. Advertised "no-fee" loans may actually cost the borrower more over the long term because these costs are often rolled into the new note through higher interest or more principal.

A typical no-fee loan is one where the points charged and all fees are included in the loan principal, meaning that the borrower does not pay these expenses at the close of escrow, but instead ends up paying on them over the life of the loan. The loan is called a no-fee loan because the borrower is not charged any fees up front.