By Marcie Geffner - HSH.com
Mortgage shoppers naturally want to lock in the lowest mortgage rates possible. However, the fees associated with your loan are an important reason why you shouldn't shop for a mortgage simply based on the lowest interest rate available.
The largest set of fees associated with any mortgage are what's known as points, which can -- and do -- affect the interest rate on your loan. If you're willing to pay what are known as "discount" or "origination" points, you can reduce or "buy down" your interest rate. On the flip side, there are also "rebate" or "negative" points. The way rebate points work is that if you can't or don't want to pay your closing costs out of pocket, you can take a higher-than-market interest rate that will substantially reduce or even zero out your closing costs.
Read on: http://library.hsh.com/articles/first-time-homebuyers/whats-the-value-in-paying-points.html