What is the tolerance category for most third-party fees?

For most third-party fees, the correct tolerance category is 10 percent. This means that when estimating costs in a loan transaction, lenders can be allowed to be within 10 percent of the actual fees charged for third-party services that consumers will use. Third-party fees include services such as appraisals, credit reports, and title insurance.

Maintaining this 10 percent tolerance ensures that borrowers have some degree of predictability about their closing costs, while still allowing for some variability due to factors outside the lender's control. This category is crucial in fostering transparency and helping borrowers understand their financial obligations before finalizing the mortgage agreement. This tolerance aligns with the purpose of the rules set by the Consumer Financial Protection Bureau, which aim to protect consumers and ensure they are informed about their costs. Understanding this standard is vital for anyone involved in mortgage lending and closing processes.