Origination Fee
An origination fee is what a lender charges to process and underwrite your loan, usually quoted as a percent of the loan amount (often around 0.5 to 1 percent). It is one of the largest lender fees in your closing costs and is often negotiable.
The origination fee is the lender’s charge for creating your loan: taking the application, underwriting your file, and preparing the paperwork. It is typically expressed as a percent of the loan amount, so it scales with how much you borrow, and it sits among the lender fees on your Loan Estimate. Some lenders bundle underwriting and processing into the origination fee; others itemize them separately.
Because it is a lender charge rather than a third-party or government cost, the origination fee is one of the more negotiable parts of your closing costs. You can shop lenders to compare it, ask for it to be reduced, or accept a lender credit that offsets it in exchange for a slightly higher interest rate. Comparing the origination and total lender fees across several Loan Estimates is one of the clearest ways to lower what you pay to close.
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Related terms: Closing Costs , Mortgage Points , Cash to Close
Source: Consumer Financial Protection Bureau, What is an origination fee
Last updated . Part of the FinExplained finance glossary .