What are basis points when determining a home loan?

A basis point is a term used by lenders and the financial sector that relates to interest rates and is equal to 1/100th of a percentage point per year. So 5 basis points would equal 0.05%, 50 basis points would equal 0.5%, and 100 basis points would equal 1%. They are an easier way of expressing the difference between whole percentages and are often used for real estate lending and yields on bonds.