What is Lender Credit?
A lender credit is a sum a lender agrees to pay toward a borrower's closing costs in exchange for a higher interest rate on the mortgage.
A lender credit is an amount applied to closing costs, funded by the lender in exchange for a higher interest rate than the borrower might otherwise qualify for. Borrowers encounter it when they want to reduce upfront cash needs, often called a no-cost or low-cost mortgage. Watch for the trade-off: a higher rate increases monthly payments and total interest over the loan term. Lender credits may be limited by loan-to-value ratios and loan program rules. Compare the long-term cost of the higher rate against the immediate savings on closing costs before choosing this option.
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