What is a loan origination fee?

August 9, 2019
Author: New England Home Mortgage

When you are buying a home, the list of items included in the closing costs can be daunting. One of the charges, if you get a mortgage, is a loan origination fee.

An origination fee is an upfront fee that is usually paid for at closing. This fee is for the research, paperwork, and other steps it takes to make sure the entire loan process is completed on time.  

The origination fee is typically around 1% of the total mortgage loan amount and must be paid in full at the time of the closing. Different lenders may have different costs associated with loan origination fees. At New England Home Mortgage, we explain all the costs related to your loan as you decide what lender and loan work best for you.

While the origination fee is usually 1% of the mortgage, that number is not always set in stone. Loans that are considered risky or difficult to approve will often have a higher origination fee. On the flip side, if your credit score is excellent and the loan you are going after is straightforward, the fee might be less.

Often, you can also choose to pay the lender more on top of the loan origination fee to lower the interest rate for the life of the loan. This is referred to as paying discount points. With most lenders, the purchase of one discount point will lower the interest rate by .25%.

Do you have more questions about fees associated with closing costs and the mortgage loan process? Contact us today.

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