What are points and how many do I have to pay?
Generally speaking, points are fees levied by the lender based on the loan amount. One point is equal to 1% of your loan amount. For example, two points on a $200,000 mortgage is $4,000. Discount points are used to buy down the interest rate. Some points are referred to as loan origination points; this is usually one point and is charged by the lender. How many points you pay is determined by several factors including your lender, your FICO scores and others.
One point is equal one percent of your loan amount. Points are paid when the loan closes, not at the time you apply for the loan. It is the fee paid for performing the work needed to fund a mortgage loan. You can also pay additional points (discount points) to buy your rate down. Conversely you can pay less in points or no points and accept a higher interest rate. This could be a good idea should you be selling your home within a couple of years as the increase payment over a couple of years will not be as much as points charged.
