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Every rate has a price

For the same borrower and the same loan, pricing offers a range of interest rates, each with a different up-front cost. Here is what moves when you move along it.

By Michael Wright · NMLS #134086 Published September 18, 2026

What par means

Par commonly describes the rate with no discount-point charge and no rate-based lender credit on that particular pricing basis. Ask whether the quoted basis includes broker compensation and all applicable adjustments — that single question removes most of the confusion in a rate conversation.

Lower rateHigher rateyou pay discount points to buy it downthe pricing premium funds a lender creditPARno points, no rate-based creditUP-FRONT COSTMore — you buy the rate downLess — a credit covers costsMONTHLY PAYMENTLowerHigherINTEREST OVER TIMELessMore
An up-front cost is not the same thing as cash out of your pocket. The cost is real, but who settles it varies. On a purchase it can be cash you bring, or it can be covered by a seller or builder credit — within the program’s limits on contributions from interested parties, a large enough credit can absorb the points and the closing costs entirely. On a refinance the cost is almost always financed into the new loan instead: you close without funds, but the balance you repay is larger and you pay interest on it. Ask how the up-front cost is being settled, not only what you owe on closing day.1,2,3

Points down, credits up

Discount points are an up-front charge used to obtain a lower interest rate. A higher-rate option can generate a pricing premium that supports a lender credit toward closing costs. This rate-and-cost tradeoff applies across every business model — bank, credit union, retail lender, correspondent and broker alike.1

A premium is not your loan officer’s bonus

The price assigned to the loan changes as the interest rate changes. That does not mean the loan officer receives more compensation for moving you to the higher rate. Company pricing and originator pay are separate subjects, and the law keeps them that way.4

The question that makes a quote real

There is one request that turns a rate quote into something you can compare: “Show me this same loan at par, with the points, and with the credit — and what each costs me over five years.” Any loan officer who cannot produce that comparison is not really quoting you.

Par is a pricing reference, not a universal market rate. A no-point option can still include other origination charges and closing expenses.

Sources

These references support the factual explanations above. Where this page states a preference rather than a fact, it says so — those are our editorial judgement, not a claim that any one channel always costs less.

1CFPB · Lender credits and discount pointsHow upfront costs and interest rates trade off.
2Fannie Mae · Interested Party ContributionsSeller and builder contributions; eligible uses and limitations.
3Fannie Mae · Limited Cash-Out Refinance TransactionsPermitted financing of closing costs and prepaid items; eligibility and restrictions.
4CFPB · How a mortgage loan officer or broker gets paidSalary and commission structures; compensation cannot vary with mortgage terms.

The whole argument, in one place

How Your Loan Officer Gets Paid

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