What do points mean in home loans?
by 
The Curious Bag
ANSWERS: 1
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When a homeowner purchases a mortgage, he has the option of purchasing "points" or paying a fee to purchase or "buy down" to a lower interest rate than originally offered by his lender.
Significance
It is in the borrower's best interest to get the lowest possible interest rate. Purchasing points can ensure that this happens.
Function
The interest rate determines the mortgage payment and the overall interest paid over the life of the loan.
Time Frame
The borrower can purchase the points during the purchase or refinancing process, but must do so prior to the mortgage loan being underwritten.
Considerations
Depending upon the amount of points purchased and the size of the loan, the points can range from several hundred to several thousand dollars.
Misconceptions
Points are not the same thing as the origination fees, which are the fees paid to the lender to complete the mortgage.
Source:
FederalReserve.gov: A Consumer's Guide to Mortgage Refinancing
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