Points are costs added to your loan for selecting a lower interest rate. We often like to tell people that rates don’t move, only the costs associated with them move. So for any rate, there is usually a cost or a credit associated with that rate. If you want a really low interest rate, you will have to pay “points”, or prepaid financing charges up front. If you need credits to cover your closing costs, you can choose a higher rate and essentially “sell” points to the lender instead of buying them. This will provide you with a lender credit which can be used towards your closing costs so you don’t have to come out of pocket to cover closing costs.

If you chose to go with no points and no credits, you will only be required to pay the standard closing costs which are applicable to all loans.