As a general rule, the APR is considered accurate if it is not more than what fraction of 1 percent above or below the disclosed APR?

As a general rule, the APR is considered accurate if it is not more than what fraction of 1 percent above or below the disclosed APR?

• A. 1/4th
• B. 1/8th
• C. 1/16th
• D. 1/2nd

Answer: (B)

The correct choice regarding the acceptable accuracy range for the Annual Percentage Rate (APR) is that it should not vary more than 1/8th of 1 percent from the disclosed APR. This standard arises from regulations set forth by the Truth in Lending Act (TILA), which aims to ensure that borrowers receive clear and accurate information about the cost of their loans. The specific threshold of 1/8th of 1 percent (or 0.125 percent) is established to give a reasonable tolerance in the calculation of the APR. If a lender discloses an APR, it must reflect the true cost of the loan, including not only the interest rate but also any additional fees, allowing consumers to effectively compare different loan offers. If the disclosed APR is outside this range, it may suggest an error in the calculation or misrepresent the loan's costs, which could lead to compliance issues for the lender. Understanding this tolerance is crucial for mortgage loan officers, as they need to ensure the accuracy of their disclosures and maintain compliance with federal regulations.

The correct choice regarding the acceptable accuracy range for the Annual Percentage Rate (APR) is that it should not vary more than 1/8th of 1 percent from the disclosed APR.

This standard arises from regulations set forth by the Truth in Lending Act (TILA), which aims to ensure that borrowers receive clear and accurate information about the cost of their loans. The specific threshold of 1/8th of 1 percent (or 0.125 percent) is established to give a reasonable tolerance in the calculation of the APR. If a lender discloses an APR, it must reflect the true cost of the loan, including not only the interest rate but also any additional fees, allowing consumers to effectively compare different loan offers.

If the disclosed APR is outside this range, it may suggest an error in the calculation or misrepresent the loan's costs, which could lead to compliance issues for the lender.

Understanding this tolerance is crucial for mortgage loan officers, as they need to ensure the accuracy of their disclosures and maintain compliance with federal regulations.