Loan Origination Fee
A Loan Origination Fee is a charge by a lender to process a new loan application. This fee typically covers the cost of underwriting, processing, and preparing the loan. It is usually expressed as a percentage of the total loan amount and can vary based on the lender and the borrower’s Creditworthiness.
For example, if a borrower takes out a $200,000 mortgage and the loan origination fee is 1%, the borrower would pay $2,000 as a part of the closing costs.
In some cases, lenders may offer to roll the loan origination fee into the total loan amount, allowing the borrower to finance it over the term of the loan. However, this can increase the overall interest paid over the life of the loan.
It is important for borrowers to review and compare loan origination fees when shopping for a mortgage or other types of loans, as these fees can significantly impact the overall cost of borrowing.