Points are used to pay for a reduced interest rate on a home loan. Each point correlates to one percent of the loan amount.

For example:

$100,000 Loan: 1 point = $1,000

$325,000 Loan: 1 point = $3,250

You pay points to earn a specified loan rate. Depending on your credit score and market conditions, a lender will provide your loan options accordingly.

What Does it Mean if the Interest Rate is Offered at “No Cost”?

An interest rate being offered at “no cost” means that there are no points that the lender is requiring the borrower to pay in order to obtain that rate.

How Can I Get the Rate I Want?

Credit score is one way the rates and points are calculated. It definitely helps to have a higher score, but it is not the only factor in determining your “creditworthiness”.

As you can see, points vary depending on several factors. They’re also not a requirement for obtaining a loan. Depending on your financial goals with a new loan or a refinance, it may be in your best interest NOT to purchase any points. There is no wrong answer; there is only the choice that is right for you.

 To find out what your specific financial situation calls for, get in touch with one of our lenders for a free quote today!