What are lender credits and when do they make sense?

A lender credit is money the lender contributes toward your closing costs in exchange for accepting a slightly higher interest rate. It's essentially the reverse of paying points: instead of paying upfront to lower your rate, you take a higher rate to lower your upfront cash. Lender credits make sense when you're short on cash to close, or when you don't expect to keep the loan long — if you'll move or refinance within a few years, the lower upfront cost can outweigh the extra interest you'd pay over that short window. The break-even math matters: divide the credit by the increase in your monthly payment to see how many months until the higher rate erases the savings. If you'll stay in the home and loan well past that point, paying costs upfront (or even buying points) is usually cheaper. Ask your lender to show both options side by side.