What Is Origination Fee?
A lender's upfront charge to process and underwrite your loan, typically 0.5-1% of the loan amount.
Definition
The origination fee is what the lender charges to evaluate, process, prepare, and submit your loan. It covers the work of underwriting and setting up the loan file. Typical range is 0.5% to 1% of the loan amount, though some lenders quote it as a flat dollar amount. Origination fees are negotiable, especially in competitive rate environments. Some lenders advertise no-origination-fee loans but compensate by charging a slightly higher interest rate instead. Always compare offers using the APR, which folds in the origination fee so you can see the true cost of each loan.
Example
A $300,000 loan with a 1% origination fee costs $3,000 upfront at closing. A competing lender charges 0.5% ($1,500) but quotes a rate 0.125% higher. Use a break-even calculation to choose.