Costs

Lender Credit

A lender credit is money the lender puts toward your closing costs, usually in exchange for a slightly higher interest rate. It lowers the cash you need today, but you may pay more over time through the rate. It's the mirror image of paying points, and whether it's worth it depends on how long you keep the loan.

Lender credits and discount points are two ends of the same lever. Points cost you money upfront to buy a lower rate. A lender credit does the opposite: it hands you money toward closing costs and accepts a higher rate in return.

Credits shine when you’re short on cash to close or you don’t plan to keep the loan long. If you’re staying put for many years, the higher rate can outweigh the upfront help. There’s no universal right answer, so I’ll run the breakeven with you and let your timeline decide.

Related terms

Discount Points

Discount points are an up-front fee you can pay to permanently lower your interest rate. One point usually costs 1% of your loan amount. Points may be worth it if you keep the loan long enough for the monthly savings to outweigh the cost, but not if you'll move or refinance soon.

Closing Costs

Closing costs are the fees you pay to finalize your home purchase, on top of your down payment. They include lender fees, title and escrow charges, an appraisal, and prepaid items like taxes and insurance. Closing costs commonly run roughly 2% to 5% of the purchase price, though it varies by location and loan.

Origination Fee

An origination fee is what a lender charges to process and underwrite your loan. On your Loan Estimate it shows up under Origination Charges, and it can include points and an underwriting fee. It's one of the costs worth comparing between lenders, since the same loan can carry very different origination charges.

Last updated: June 13, 2026

This definition is educational and isn't an offer to lend or financial advice. Rates, programs, and guidelines may change without notice. All loans are subject to credit and property approval.

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