The “Adjustments and Other Credits” line on a Loan Estimate is a catch-all on page 2 that captures items from your purchase contract that don’t fit on any other line, mainly property tax and homeowner association prorations between you and the seller, third-party money like family gifts or down payment assistance, and other contract charges such as personal property you’re buying from the seller. It sits inside the Calculating Cash to Close table and either raises or lowers the cash you’ll need at closing depending on whether the net of those items works for you or against you.
What Shows Up on This Line
Federal regulation defines the line as covering costs paid by someone other than the lender, borrower, or seller, plus amounts required under your purchase contract that don’t belong elsewhere on the form.1eCFR. 12 CFR 1026.37 – Content of Disclosures for Certain Mortgage Transactions (Loan Estimate) In practice, three kinds of items account for most of what you’ll see.
Property Tax and HOA Prorations
Your purchase contract divides ongoing expenses between you and the seller based on the closing date. If the seller already paid property taxes for the full year and you close in July, you’d owe the seller roughly six months of taxes, and that amount appears here as a positive number that adds to your cash to close. The same logic applies to homeowner association dues. Prorations keep either party from paying the other’s share of recurring costs.
Third-Party Contributions
Money coming from someone other than you, your lender, or the seller lands on this line. The most common examples are gifts from family members expected at closing and down payment assistance from state or local housing programs.2Consumer Financial Protection Bureau. TILA-RESPA Integrated Disclosure – Guide to the Loan Estimate and Closing Disclosure Forms A $10,000 gift from a parent, backed by a gift letter, would show as a negative number because it reduces what you need to bring. Proceeds from subordinate financing or builder credits toward closing costs also appear here.
Other Contract-Related Charges
Purchase agreements sometimes include charges that don’t fit the regular closing cost tables. If you agreed to buy the seller’s patio furniture or appliances as part of the deal, that personal property charge lands here as a positive amount because you owe it at closing.
What Belongs on a Different Line
Two items are routinely confused with Adjustments and Other Credits because they also reduce your cash to close. Both have their own lines, and reading them in the wrong place is a common reason borrowers think the math looks off.
Seller Credits Are Separate
A seller credit, where the seller agrees to pay some or all of your closing costs, sits on its own line directly above Adjustments and Other Credits. The regulation defines it as the total the seller pays toward your loan costs and other costs.1eCFR. 12 CFR 1026.37 – Content of Disclosures for Certain Mortgage Transactions (Loan Estimate) If you negotiated a $5,000 seller concession for closing costs, look for it on the Seller Credits line. If it’s showing up on Adjustments and Other Credits instead, flag it with your lender.
Lender Credits Are Netted Earlier
A lender credit, which is money the lender gives you to offset closing costs (usually in exchange for a higher interest rate), is baked into the Total Closing Costs line at the top of the table. It has already reduced that number before the rest of the math begins. The specific lender credit amount is broken out in the closing costs detail on the same page, but in the Calculating Cash to Close table it won’t appear on its own line.
How a Positive or Negative Number Changes Your Cash to Close
Adjustments and Other Credits can swing either direction, and the sign matters. When the line shows a negative number, it reduces your cash to close. A buyer with $4,000 in down payment assistance and a $1,200 property tax credit from the seller’s prepayment would see roughly negative $5,200 here, cutting that much off the bottom-line figure.
The line can also run positive. If prorations mean you owe the seller more than you’re receiving from third-party sources, the line adds to your cash requirement. A buyer closing in February on a property where taxes are paid in arrears might owe only a small proration, but if the contract also includes $3,000 for personal property, the line could easily end up positive.
If You’re Refinancing, You Won’t See This Line
Refinance Loan Estimates often use an alternative version of the Calculating Cash to Close table that replaces “Adjustments and Other Credits” with a line called “Estimated Payoffs and Payments,” which covers your existing mortgage balance and other debts being paid off through the new loan.2Consumer Financial Protection Bureau. TILA-RESPA Integrated Disclosure – Guide to the Loan Estimate and Closing Disclosure Forms The alternative table also drops the down payment, deposit, and seller credits lines, since those don’t apply in a refinance. So if your Loan Estimate has no Adjustments and Other Credits line at all, that’s why.
Checking the Line Against Your Contract
Once you have the Loan Estimate (and later the Closing Disclosure), pull out your purchase contract and work the line item by item. Every proration, every promised gift, and every assistance grant should be accounted for. If a $2,000 property tax proration is missing, or a down payment assistance credit you were promised doesn’t appear, contact your lender or settlement agent to correct it before closing.3Consumer Financial Protection Bureau. What Should I Do If I Find an Error in One of My Mortgage Closing Documents?
Also check that items are on the correct lines. A seller credit sitting under Adjustments and Other Credits instead of the Seller Credits line may not change your bottom number, but it can signal a processing error worth sorting out. If your lender won’t resolve the issue, you can file a complaint with the Consumer Financial Protection Bureau online or by calling (855) 411-2372.3Consumer Financial Protection Bureau. What Should I Do If I Find an Error in One of My Mortgage Closing Documents? The CFPB forwards complaints to the lender and typically gets a response within 15 days.