I can't comment on the price adjustments from the lender you are getting your mortgage from because you haven't said who that is.
However what you've been told coincides to the standard price adjustments that Fannie Mae puts forth.
You can view them at https://www.fanniemae.com/content/pricing/llpa-matrix.pdf on page 2. If you look at it, you'll see that for credit scores of 700 & above at 70.01-75% LTV have a pricing adjustment which is .25% less than at 75.01-80% LTV. If your credit scores are in that range then what you are being told would make complete sense.
And yes, a price of 100.250 means you are currently getting a credit towards your closing costs of .25% of the loan amount you are financing. If the price improves by another .25% because the appraisal comes in to where your LTV is 75% or less then the net price would change to 100.500 and you would then get a credit towards your closing costs of .50% of the loan amount you are financing. If that credit amount is MORE than the closing costs + pre-paids (which is pre-paid interest + initial escrow account reserves if you are setting up an escrow account for taxes/insurance) then the excess credit would be applied towards the new principal balance of your loan to reduce it.
Shane Milne | Lending in all 50 states | NMLS #81195
shane@thebesthomeloans | 949-273-4161 direct