There are a number of different ways to interpret "points" however the most simple definition would be: A fee paid to a lender to discount your interest rate below market value. However, some loan officers throw in points and origination fees without giving any discount to the rate. In this case, you are not getting the benefit from them as they were intended. To give you an example, let's say a 30-year fixed conventional loan gets you a rate a 5.5% with no points and no origination fees and a small lender fee. If you were to pay 1 discount point (1% of the loan amount) you should reduce your interest rate by approx .5%. If you receive such a reduction then the monthly savings compared to the upfront fee should take about 30 months to recover. Meaning that if you have your loan longer than 2.5 years, then it was to your financial advantage to pay the points. However, if you sold your home or refinanced before 2.5 years, then you would not have made the best financial decision.

Shop around for a mortgage (don't have every lender pull your credit score though - just know the score) and see what combinations of points, origination fees and lender fees you receive so that you can make your best decision.

If you want a Bank of America quote, feel free to contact me and I will have you one in 15 seconds.

Good Luck
Luke Allison
Bank of America Home Loans
828-777-8828
luke.allison@bankofamerica.com

Hi Cydny,

Points are fees that the mortgage broker charges for their work. 1 point equals a % of the loan amount. For example 3 points on a $100k loan would equal $3k. Good luck!