What is a Loan Origination Fee?

A loan origination fee is a form of payment that covers the costs involved in your loan application and processing. The fee is paid to the company or broker originating your mortgage loan.

Amount of the Origination Fee

The amount of a loan origination fee differs from one mortgage broker to another. Depending on the terms and conditions of the loan, these charges can be reduced or avoided, while other loan officers do not require the fee. Related processing costs start from 0.5% to 2% of the total amount of loan obtained. However, the typical percentage charged is 1% of the borrowed fund. If for example you were granted a mortgage financing worth $100,000, the origination fee you need to pay is $1,000.

HUD-1 Settlement Statement

Some loan salespeople overcharge loan origination fees which a borrower should be vigilant of. The client should see to it that the amount of charges are clearly stated on the HUD-1 Settlement Statement. It is a real estate settlement form required by the government to be used in mortgage loan transactions. It contains the detailed settlement cost charged on the borrower.