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Excess Funds-Lender Credit on Refinance

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If we give a lender credit on a refinance transaction and the credit exceeds the cost on the refinance, where do the excess funds (credit) go? Can the lender just reduce the credit, or does it have to be applied to a principal reduction?

If you included the lender credit on the loan estimate disclosure, you're pretty much stuck with it at closing. If the credit exceeds the closing costs, you can credit the excess in a principal reduction to avoid making it a cash-out transaction.

First published on 06/09/2019

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