What Is Lender Credit?
Lender Credit: Money from the lender toward your closing costs in exchange for a higher interest rate.
A lender credit is the reverse of discount points: you accept a slightly higher interest rate, and the lender pays some of your closing costs.
Example
At 6.75% you pay no points. At 7.0%, the lender offers a credit of 1% of the loan. On a $300,000 loan, that's $3,000 off your cash to close, in exchange for about $50 more a month.
When it makes sense
- You're short on cash for closing
- You expect to sell or refinance within a few years
- You'd rather keep cash for reserves or repairs
Good to know
Lender credits can't exceed your actual closing costs, and you can't receive them as cash. They appear on your Loan Estimate and are locked with your rate.