The total amount of points and fees collected on a loan cannot exceed:

The total amount of points and fees that can be collected on a loan is capped at 3% of the loan amount. This limit is in accordance with the federal guidelines set forth by the Consumer Financial Protection Bureau (CFPB) under the Ability to Repay (ATR) rule. Points and fees are costs associated with obtaining the loan, including origination charges, discount points, and various closing costs.

Choosing the maximum limit necessary ensures that borrowers are not burdened with excessive fees that could inhibit their ability to repay the loan. This regulation aims to protect consumers and maintain fairness in the lending process. While there's a general guideline allowing for a 3% cap, stating 1% underestimates the allowable costs that could be associated with obtaining a mortgage. The higher percentages, like 5% and 6%, exceed regulatory standards for allowable charges, reinforcing the need to adhere to the set limit to promote responsible lending practices.