closing

credit

On a closing statement, an amount that is in a party's favor, either money they receive or something that reduces what they owe. For example, the seller is credited with the purchase price, and the buyer is credited with the earnest money and the new loan. Debits are the opposite: amounts a party owes or must pay.

Exam tip: Buyer credits include earnest money and loan amount; seller credits include sale price and prepaid items the buyer will reimburse. The purchase price is a buyer debit and seller credit.
Example: A seller who prepaid the full year's property taxes receives a credit on the closing statement for the months the buyer will own the home.

1. Under the Truth in Lending Act (Regulation Z), which phrase in an ad is a 'trigger term' requiring full credit disclosures?

Answer & explanation

Answer: A. Specific terms like the down payment amount, number or amount of payments, finance charge or repayment period trigger full disclosure (including APR). General statements do not.

Related terms & state variants

closing statement debit prepaid expense proration

Sources

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Last verified: 2026-10-23