Origination Fee
Author: Terri Ewing
Published: July 25, 2008
Origination Fee Defined
An origination fee is a fee paid to the company that originated your loan. Origination is the beginning of your loan. It is the service provided for qualifying you, finding the right loan product, and locking a rate.
A bank or a broker can charge an origination fee. The standard origination fee is 1%. If your loan amount is $300,000, a 1% origination fee would be $3,000 (1% X $300,000). An origination fee is part of your closing costs and is disclosed on the settlement statement. It is paid directly to the bank or broker at closing.
The origination fee is where the bank or broker makes a good chunk of their money so how can they do a loan with no origination fee. Yes, the origination fee is a large portion of income for them but unfortunately there is an even larger one. By increasing your rate, the bank or broker can make 1%-3% of your loan amount. If they say they will do your loan without an origination fee, then they are charging you a higher rate to make their money that way. And yes, they also jack up your rate even after charging you an origination fee.
Author: Terri Ewing
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