A credit from the lender to the buyer at closing.
A lender credit is a credit from the lender to the buyer at closing. Lender credits are designed to help cover some or all of the borrower's closing costs that they would otherwise be responsible for paying at closing.
There are multiple ways for a borrower to obtain a lender credit. One of the most popular ways is for the borrower to take a slightly higher interest rate in exchange for a lender credit. This is a popular option with FHA financing, since FHA loans are generally associated with lower interest rates.
The lender credit, which goes towards closing costs due, helps the borrower keep more cash in their pocket for closing. As is the case with any credits, the lender must ensure that all combined credits do NOT exceed total closing costs.