What is the tolerance percentage for most third-party fees listed on the Loan Estimate?

The correct tolerance percentage for most third-party fees listed on the Loan Estimate is 10%. This tolerance level is part of the regulations put forth by the Consumer Financial Protection Bureau (CFPB) under the TILA-RESPA Integrated Disclosure (TRID) rule.

When a borrower receives a Loan Estimate, it outlines the estimated fees for closing and associated costs, providing transparency. Third-party fees that fall under the 10% tolerance category include charges for services required for the loan that the lender selects but can be performed by other companies, such as fees for appraisals, credit reports, and title insurance. If the final costs exceed the estimated fees by more than this 10% threshold, the lender is required to absorb the additional cost or provide the borrower with a credit to cover it.

Understanding these tolerance levels is crucial for both borrowers and mortgage professionals, as they help manage expectations regarding final closing costs and prevent unexpected financial burdens.