Origination Fee
Also known as: Loan Origination Fee, Origination Charge
A fee charged by a mortgage lender for processing a new loan. Typically 0.5% to 1% of the loan amount, it covers the lender's administrative costs for underwriting and funding the mortgage.
Detailed Explanation
The origination fee is one of the largest closing costs associated with getting a mortgage. On a $400,000 loan, a 1% origination fee is $4,000.
Some lenders charge the origination fee as a flat amount; others charge a percentage of the loan. It appears on your Loan Estimate and Closing Disclosure documents.
When comparing lender offers, look at the origination fee as part of the total cost — a lender with a lower rate but higher origination fee may cost more overall.
In Your Contract
The origination fee is not in your purchase agreement — it appears on mortgage documents. Compare Loan Estimates from multiple lenders.
Key Points
- 1Typically 0.5% to 1% of the loan amount.
- 2Covers the lender's cost of processing and underwriting your loan.
- 3Appears on the Loan Estimate and Closing Disclosure.
- 4Some lenders offer no-origination-fee loans with higher interest rates.
- 5Compare total loan costs, not just the origination fee alone.
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