What is a Lender Credit

When you are in the process of buying a home especially when it may be your first home the prevalent challenge for consumers is having enough money for the down payment and closing costs. Again, you can count on this number to be about 3 – 7% of the purchase price so it is not a small amount. For an average purchase price of $225,000 that would equate to $6750 – $16,000. One possible solution to help is by utilizing a lender credit.

Lenders normally can bump up the ‘market’ rate by .125% – .25% to help pay for your closing costs. The more costs you want the lender to absorb or pay the higher the interest rate. The downside to this tactic is you are increasing you monthly payment with the higher interest rate so think carefully on what is best for you. The difference is it may get you in the home sooner versus not having enough money. On a mortgage amount of $200,000 for every 1/8% higher rate would increase the payment by $16 per month.

The most important thing is to work with a trusted mortgage company such as the Home Loan Advisors at Hall Financial who can discuss all these options in detail and find what is best for your situation.