I have read up one side and down the other, but I am still confused. What are the points the lenders are referring to and what roll do they play in ones loan. I know it is a large roll, but like the general public I am wildly confused. I think I understand it one minute and then I am wrong.

Sorry - which points are you refering to?

The points the lenders are referring too are basically lender fees. A lot of places will tell you there are no points or some places say 1, 2, or 3 points for a certain interest rate. In essence the more points you pay the lower the rate. Points are typically one percent of the loan amount so if you borrow $100,000 than one point will be $1000. That being said please do not believe you have to pay points in order to get a good rate on a mortgage loan. I paid no points for mine and got a great rate you basically have to search around and do your homework. I hope I answered your question.

Thanks for the clarification.

This is very true. I got no points and a very good rate, too (for that time, at least, which was 2 years ago). But yes, it takes a lot of research and not going in blindly.

Even though you got a good rate, you could have lowered it further by paying points...prepaid interest.

My general philosophy is not to pay the points. The main advantage of prepaying points is that you can get an immediate tax deduction. Otherwise,the break even point is usually years away (and by then you may want to refinance or sell anyway)

-- Peter Planchet

Paying for points is relative to your financial situation, whether you want more cash flow by lower payments because you are buying down the mortgage or if you don't plan on staying in your home long then you don't want to pay the points. Here is an article I wrote on shopping for a mortgage.
A Guide to Shoping For A Mortgage - Associated Content

Wow I did not know that about the points. We when bought our home I was clueless. Thank goodness for my husband. I believe we got one point on ours. But we needed a somewhat reasonable monthly payment.