Bank of America came out with a no-cost mortgage loan program, earlier this year. Apparently, Washington Mutual has one of these, as well.

The Bank of America plan offers a loan with no closing costs - no application fee, no appraisal fee, no credit report fee, plus you even get a $200 credit at closing (presumably to offset other fees charged by other parties).

The Bank of America plan is only available to customers with an existing relationship with the bank.

Sounds like a good deal.

How can they do it? Through volume deals with settlement providers and by using staff to do the chores that other lenders pay outside vendors to do, according to real estate columnist Lew Sichelman, writing for Dow Jones Business News.

The complaint from others (including their competitors) is that BofA has to make up their costs somehow, either by charging borrowers higher interest rates, or charging more points.

Maybe.

The banks say these programs are "loss-leaders" - a way to bring clients into the bank who would otherwise go to their competitors. With these new programs, they start long-term relationships with people, leading to future business, and profits.

I'd say, check out these programs, no matter what.

More: Banks Tempt Home Owners With No-Cost Loans - By Lew Sichelman, Dow Jones Business News, by way of Realtor.org