Lender Credits
Money the lender contributes toward your closing costs in exchange for accepting a slightly higher interest rate.
Lender credits invert the discount-point math: instead of paying points up front to lower your rate, you take a higher rate and the lender hands you cash to apply against closing costs. The credit reduces what you bring to the closing table.
Lender credits make sense when you're short on cash to close or expect to refinance or move within a few years, there's no point paying down a rate you won't keep. The trade-off is a higher payment for the life of the loan compared to a no-credit alternative.
Most rate sheets show pricing in 0.125% rate increments with the corresponding credit or cost. A good loan officer will sketch out the breakeven math, how many months of higher payment until the cost outweighs the credit, so you can decide based on your actual holding-period assumption.
Related terms
Other terms you'll see alongside Lender Credits
Prepaid interest paid at closing to permanently lower the loan's interest rate.
A blended figure that combines the note rate with most upfront loan costs to express the true yearly cost of borrowing.
The collection of fees and prepaid items, separate from the down payment, that a borrower pays at closing.
The percentage of the loan balance the lender charges as the cost of borrowing, paid annually but accrued daily.
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