A point is 1 percent of the loan amount. "Discount points" generally vary inversely with the rate quoted -- that is, the lower the rate quoted, the higher the amount of points charged. Discount points are used to adjust the yield on the loan to the institution providing the money. Origination points, such as is common for FHA and VA loans, are generally charged by the lender to offset the lender costs of administering the transaction.

 

Back to FAQ