Costs & insurance

Origination fee

A lender's charge for processing a new loan, usually a percentage of the amount borrowed, paid at closing.

Sources

What does origination fee mean?

The origination fee is what the lender charges to process and underwrite your loan, usually quoted as a percentage of the amount borrowed and paid at closing. Because it is a real cost of the loan, it feeds into the APR, which is the fairest way to compare two offers with different fees. It is also negotiable, and sometimes offset by a lender credit in exchange for a slightly higher rate.

What it costs and where to find it

Origination fees commonly run around 0.5% to 1% of the loan — $1,750 to $3,500 on a $350,000 mortgage. They appear in section A, “Origination Charges,” on page 2 of the Loan Estimate, alongside any application or underwriting fees and discount points.

Section A is the lender’s own price for making the loan, which makes it the cleanest line for comparing lenders. These charges are also in the zero-tolerance category: they generally cannot increase at closing unless something about the loan changes.

Ways to reduce it

Get at least three Loan Estimates and use the lowest section A as leverage.

Ask whether the fee can be waived in exchange for a slightly higher rate (a lender credit).

Ask the seller for a credit toward closing costs, within your loan program’s limits.

Compare the APR, which folds the fee into the yearly cost of the loan.

Frequently asked

How much is a typical origination fee?

Commonly around 0.5% to 1% of the loan amount — $1,500 to $3,000 on a $300,000 mortgage — though it varies by lender. Because it is a real cost of borrowing, it is built into the loan’s APR.

Can you negotiate the origination fee?

Yes. It is one of the more negotiable lines on a loan estimate; you can ask the lender to lower or waive it, or accept a slightly higher rate for a lender credit that offsets it. Comparing loan estimates gives you leverage.