Q: Can a credit for closing costs exceed the actual closing costs on a loan?
A: No. On a Lender-Paid Compensation loan when there is excess premium rate credit, the difference between the credit and the actual closing costs will be applied as a principal reduction on the new loan. The credit will show as a principal reduction on the HUD-1 as a line item to loanDepot Wholesale. On a Rate/Term Refinance transaction, the cash the Borrower is getting at closing, if any, plus the excess credit cannot exceed $2000. If the total exceeds $2000, the loan amount must be reduced to an amount so that the total does not exceed $2000. loanDepot Wholesale will follow agency guidelines for maximum principal reduction amounts.