Basis Points
A basis point is a unit of measurement equal to one-hundredth of one percent (0.01%). In mortgage lending, basis points are used to express changes in interest rates, pricing adjustments, and compensation structures.
For example, if your interest rate moves from 6.50% to 6.75%, that is a 25 basis point increase. Lenders, investors, and loan officers use basis points to communicate precise changes in pricing without ambiguity.
Why This Matters: Small changes in basis points can have a significant impact on your monthly payment and total loan cost. Understanding this unit of measurement helps you evaluate rate quotes and pricing adjustments with clarity.
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