General Mortgage Knowledge · 20% of the SAFE exammedium
Correct answer: Legal — the higher rate and credit must be clearly disclosed on the Loan Estimate, including the effect on APR
This IS legal. Lender credits are permitted under current rules — the borrower accepts a higher rate to obtain credits toward closing costs. The disclosure requirement: the Loan Estimate must clearly show the interest rate, APR (which reflects the higher rate), and the lender credit amount. The $500 excess credit is also permissible (shown as a credit to borrower). The APR disclosure ensures the borrower understands the true cost of accepting the higher rate.
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