Origination Fee
Definition and meaning of Origination Fee in real estate.
An origination fee is a charge assessed by a mortgage lender to cover the administrative costs of processing, underwriting, and preparing a new loan.
In more detail
This fee is typically calculated as a percentage of the total loan amount, usually ranging from 0.5 percent to 1 percent. It is paid at closing as part of the transaction costs and is often expressed in points, where one point equals 1 percent of the loan amount.
Buyers should review their Loan Estimate document to see the exact breakdown of this charge. Some lenders offer no-origination-fee mortgages, but these usually come with higher interest rates to compensate.
Key facts
| Category | Mortgages & Financing |
|---|---|
| Average cost | 0.5% to 1% of the loan amount |
| Paid by | Borrower at closing |
| Listed on | Loan Estimate and Closing Disclosure |
A buyer obtains a mortgage for $300,000, and the lender charges a 1 percent origination fee, which requires the buyer to pay $3,000 at closing.
Frequently asked questions
Can you negotiate the origination fee with a lender?
Yes, borrowers can negotiate these fees, ask the lender to match a competitor, or request that the seller pay the fee through seller concessions.
What is the difference between an origination fee and discount points?
An origination fee covers the administrative cost of creating the loan. Discount points are optional fees paid to the lender in exchange for a lower interest rate over the life of the mortgage.
Related terms
Sources & references
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