A lender credit is the mirror image of discount points. Discount points increase your closing costs but reduce your interest rate, while a lender credit reduces your closing costs but increases your interest rate. Picture a teeter-totter with points on one end and your rate on the other. Paying more points increases your closing costs but lowers your rate.  But what if you want lower closing costs? Just tip the teeter-totter the other way around – increase your rate and you lower points. Push your rate up enough, and points will drop to zero. Go higher still, and points drop below zero., becoming a credit that reduces your costs.  A “lender credit” is just negative “discount points”.