Reg Z APR Tolerance: The 1/8 and 1/4 Point Rules, With Examples
The annual percentage rate on a Closing Disclosure does not have to be exact. Regulation Z gives a tolerance, and that tolerance decides whether a late change in the loan only needs a corrected disclosure or also pushes back the closing date by a new 3-business-day wait. Test questions give a disclosed APR, a final APR and a closing date, and ask what the creditor must do. Rules below are from 12 CFR 1026.22 and 1026.19(f)(2), as at 11 Oct 2026.
The tolerances
| Transaction | Disclosed APR is accurate if it is within | Source |
|---|---|---|
| Regular (single advance, regular payments: most fixed-rate and ARM purchase and refinance loans) | 1/8 of 1 percentage point (0.125) above or below the actual APR | 12 CFR 1026.22(a)(2) |
| Irregular (multiple advances, irregular payment periods or irregular payment amounts, such as a construction loan with draws) | 1/4 of 1 percentage point (0.25) above or below the actual APR | 12 CFR 1026.22(a)(3) |
| Mortgage loans, extra rule | An APR is also accurate if it results from a disclosed finance charge that Regulation Z treats as accurate | 12 CFR 1026.22(a)(4); 1026.38(o)(2) |
The tolerance is measured in percentage points, not as a fraction of the APR. An odd first period or an odd first or final payment does not make a loan irregular, and an adjustable-rate loan disclosed on a regular amortization schedule is still a regular transaction (12 CFR 1026.22(a)(3); comment 22(a)(3)-1).
When an APR change restarts the 3-day wait
If, at consummation, the APR on the Closing Disclosure has become inaccurate under 12 CFR 1026.22, the creditor must give a corrected Closing Disclosure that the borrower receives at least 3 business days before consummation (12 CFR 1026.19(f)(2)(ii)(A)). If the change stays within tolerance, the creditor still gives a corrected Closing Disclosure, but at or before consummation, with no new wait (12 CFR 1026.19(f)(2)(i)).
When the APR goes down
For a mortgage, the disclosed finance charge, and the APR that flows from it, are treated as accurate if the disclosed finance charge is greater than the correct amount (12 CFR 1026.38(o)(2)). Section 1026.22(a)(4) then treats an APR that results from that finance charge as accurate. So when the APR falls by more than 1/8 point because the finance charge fell, for example because the creditor waived a fee, the APR already disclosed counts as accurate and closing does not move. A corrected Closing Disclosure is still due at or before consummation.
Worked example
The borrower receives the Closing Disclosure in person on Monday, August 3, 2026. It shows an APR of 6.875% on a regular fixed-rate loan. Consummation is set for Thursday, August 6, 2026.
Case 1: the APR at consummation will be 6.950%. Difference 0.075, within 0.125. Accurate. Corrected Closing Disclosure at or before consummation; close Thursday as planned.
Case 2: the APR will be 7.050%. Difference 0.175, more than 0.125. Inaccurate. If the corrected Closing Disclosure is received in person on Thursday, August 6, count Friday (1), Saturday (2), skip Sunday, Monday (3). Earliest consummation Monday, August 10, 2026.
Case 3: the creditor waives a $1,500 origination fee and the APR falls to 6.700%. The disclosed finance charge is now overstated, so it and the APR it produced are treated as accurate. No new wait.
Exam trap
Exam takeaway
Test yourself with our Regulation Z practice questions and read the TILA and Regulation Z study note. The other two restart triggers are in the TRID timeline cheat sheet.
Frequently asked questions
What is the APR tolerance under Regulation Z?
1/8 of 1 percentage point for a regular transaction and 1/4 of 1 percentage point for an irregular one, above or below the actual APR (12 CFR 1026.22(a)(2)-(3)).
Does an APR change after the Closing Disclosure require a new 3-day wait?
Only if the APR becomes inaccurate, meaning outside the tolerance. A change within tolerance needs a corrected Closing Disclosure at or before consummation, with no new wait (12 CFR 1026.19(f)(2)).
Does a lower APR restart the TRID waiting period?
Not when the APR fell because the finance charge fell. An overstated finance charge, and the APR it produces, are treated as accurate (12 CFR 1026.22(a)(4); 1026.38(o)(2)).
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