A higher priced loan is defined by which of the following criteria?

The correct answer relates to the criteria established for identifying a higher-priced loan, specifically referring to how these loans are assessed and categorized under regulations. Higher-priced loans are defined through the comparison of the loan's annual percentage rate (APR) to the average prime offer rate, which is a benchmark often used to gauge the prevailing market rates for conventional loans.

When a loan's APR exceeds the average prime offer rate by a set margin, it is classified as a higher-priced loan. This classification is significant as it triggers additional legal protections for borrowers, such as stricter underwriting and disclosure requirements.

The other options may touch upon aspects of loan underwriting or costs, but they do not accurately encapsulate the specific regulatory definition used for higher-priced loans. Therefore, understanding that a higher-priced loan is fundamentally connected to its relationship with the average prime offer rate is critical for recognizing its implications in real estate and mortgage transactions.