Points / discount points
Upfront fees paid to the lender to buy down the interest rate. 1 point = 1% of the loan amount. On a $400,000 loan, 1 point costs $4,000 and typically reduces the rate by 0.25%. Whether buying points makes sense depends on how long you hold the loan before selling or refinancing.
How does this affect your loan? Estimate self-employed qualifying income with the DTI calculator, or read the self-employed mortgage guide.
Related terms
- Origination fee — The lender’s fee for processing and underwriting the loan. Typically 0.5–1% on conventional loans; 1–2% on non…
- MIP (Mortgage Insurance Premium) — FHA’s mortgage insurance charge. Consists of an upfront MIP (1.75% of the loan, typically financed into the ba…
- PMI (Private Mortgage Insurance) — Required on conventional loans with less than 20% down. Protects the lender — not the borrower. Typically 0.5–…
- Rate premium — The additional interest rate paid for a non-QM loan above the conventional baseline. The premium exists becaus…
- Prepayment penalty — A fee charged if you pay off the loan early — either through a full payoff (refinance or sale) or, on some pro…
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Sources
Educational definition only — not financial, legal, or tax advice. Programs and limits change; verify current terms with a licensed professional.