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What are lender credits on a Loan Estimate?
Updated November 2026 · Every dollar figure is an illustrative example, not a quoteA lender credit is money the lender puts toward your closing costs in exchange for a higher interest rate, shown as a negative number at the bottom of Section J; it is the mirror image of points, where you pay up front for a lower rate. A credit disclosed on the Loan Estimate cannot be reduced at closing, and whether it is a good trade depends on how long you keep the loan.
Where it is on the form
Page 2, the last line of Section J, as Lender Credits, printed with a minus sign under the D + I total. It also appears on page 1 in the Costs at Closing box as part of Estimated Closing Costs ('includes ... in Lender Credits'). On the Closing Disclosure, a credit the lender gives to fix a tolerance violation is added to this line with a note saying so.
The exchange rate is the lender's and changes daily; as a rule of thumb each eighth of a percent of rate is worth about half a point of credit, but that varies with the lender and the market. A credit large enough to cover all closing costs ('no-cost' loans) usually means a rate several eighths above the zero-credit rate.
The math is the points math run backwards. Take a $380,000 loan quoted at 6.625% with no credit, or 6.875% with a $3,800 credit. The higher rate costs about $63 more a month; $3,800 ÷ $63 is about 60 months. Keep the loan less than five years and the credit was free money; keep it longer and the higher rate costs more than the credit was worth. Are mortgage points worth it? works the same trade in the other direction.
A 'no closing cost' loan is a lender credit large enough to cover Section D and sometimes more, paid for by a rate that may be a quarter to a half of a percent higher. It is a real option for someone who expects to refinance or sell within a few years, and an expensive one for someone who will keep the loan.
Can you shop for it?
Not as a service, but it is a price the lender sets, and two lenders will offer different credits at the same rate. Ask each lender for the rate at zero points and zero credit, then for the credit at a given higher rate, so you compare like with like.
Can it change between the Loan Estimate and closing?
A general lender credit on the Loan Estimate cannot be reduced on the Closing Disclosure unless a real change to the loan led to a revised estimate; the rule treats a smaller credit as an increase in your costs. If the rate is not locked, the credit floats with the rate until it is. A credit tied to a specific fee may change with that fee.
A worked example (illustrative)
A $380,000, 30-year fixed loan, the same lender, two prices. The figures are made up to show the math.
| Quote | Rate | Lender credit | Monthly P&I |
|---|---|---|---|
| No credit | 6.625% | $0 | $2,433 |
| With credit | 6.875% | −$3,800 | $2,496 |
The credit pays $3,800 of closing costs today and costs about $63 a month. For five years the credit is ahead; after that, the higher rate has cost more than the credit gave. Sell or refinance inside five years and the credit was the better deal; keep the loan and the plain rate was.
Questions to ask the lender
- What is the rate with no credit and no points, and what credit do you offer at each eighth above it?
- Is this a general credit for a higher rate, or a credit tied to a specific fee?
- If I lock today, is this credit locked with the rate?
Red flags
- A lender credit that shrinks on the Closing Disclosure with no revised Loan Estimate.
- A 'no-cost' loan compared against another lender's zero-credit rate as if the rates were the same product.
- A credit that exceeds your closing costs, which most loan programs do not allow and the lender will cut at closing.
Questions people ask
Are lender credits free money?
No. They are paid for by a higher rate, which costs you every month for as long as you keep the loan. They are the better deal for a short stay and the worse one for a long one. Divide the credit by the extra monthly payment to find the break-even month.
Can a lender credit be reduced at closing?
Not on its own. A general credit on the Loan Estimate is protected like a zero-tolerance fee: reducing it is treated as raising your costs. It can change only through a revised Loan Estimate after a real change to the loan, or if the rate floats because it was not locked.
What is a no closing cost mortgage?
A loan where the lender credit covers all or most of the closing costs, in exchange for a rate typically a quarter to a half of a percent higher. The costs are still paid; you pay them through the rate over time instead of in cash at closing.
Only have one quote? That's the problem.
Tell us the rate and the fees you were quoted. It is free, there is no credit pull, and nobody calls you. We check whether another lender beats it, fees included. Or start with the free Loan Estimate checker, which reads your rate, points and Section A and flags anything out of the ordinary.
Check my quoteEvery dollar figure on this page is illustrative. Fee ranges are general observations, not a survey or a quote, and are not a loan offer, approval, commitment to lend, or Loan Estimate. Your actual rates and fees depend on qualification with lenders, your state and county, and your closing date. The tolerance rules described are the federal TRID rules in general terms; the rule itself and your own Loan Estimate and Closing Disclosure decide how it applies to your loan. comparemyloan does not negotiate with lenders, lock rates, or take loan applications.