Loan Officer Practice Exam 2026 – Comprehensive All-in-One Guide for Exam Success!

A lender credit to the borrower is an important aspect reflected on the Closing Disclosure because it indicates any financial benefit or concession provided by the lender to assist the borrower with closing costs. This credit can come in various forms, such as covering certain fees, reducing the overall interest rate in exchange for a higher upfront cost, or giving a cash credit toward closing expenses.

When preparing the Closing Disclosure, all credits and debits must clearly reflect the resources available to the borrower, ensuring a transparent breakdown of what the borrower is responsible for paying at closing and how much they may benefit from any lender contributions. This helps the borrower understand their financial obligations and any help they are receiving from the lender, thus facilitating a smoother transaction process.

Other options are related concepts, but they do not fulfill the specific requirement of showing a direct lender credit to the borrower. For example, a seller prepaid expense refers to costs that the seller has already covered and would not be applicable as a credit provided by the lender. Similarly, a borrower credit to the lender does not indicate a benefit to the borrower, and a good faith deposit, while part of the financing process, does not directly involve a lender's credit to the borrower. Therefore, the correct answer reflects the specific financial assistance being provided