One point = 1% of your loan amount, paid upfront at closing. In exchange, your lender lowers your interest rate — typically by 0.25% per point, though this varies by lender and market conditions.
On a $400,000 loan: 1 point = $4,000 upfront. Rate reduction: ~0.25%. Monthly savings: ~$58.
Cost of points ÷ Monthly savings = Break-even in months
$4,000 ÷ $58 = 69 months (5.75 years)
If you sell or refinance before 5.75 years: points were a bad deal. If you stay longer: points save money.
The reverse also exists: lenders can pay your closing costs in exchange for a higher rate. This makes sense for buyers with limited cash who plan short-term ownership. The higher rate costs less than the closing costs you avoided — if you sell or refi quickly enough.
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🏦 Ask Zai Free → 🔍 Decode Denial LetterNot financial advice. Educational content based on 23 years of mortgage industry experience.
Prices and rates are widely reported. Whether a lender says yes is not. In the complete 2025 federal record, denial rates across the 100 largest FHA lenders ran from 1.8% to 78.7% — same programme, same year.
And it is not simply who applies where: standardizing on state, loan amount, income, debt-to-income and loan-to-value, applicant mix explains only a 2.7× range in expected outcomes.
CFPB HMDA 2025, computed by FinanceRateCalc. Covers the highest-volume lenders published per market, not all lenders. Historical observations, not predictions. CC BY 4.0, not independently reproduced.