Question:

What is the typical loan origination fee?

Answer:

A typical loan origination fee varies from 0.75 to 3% for standard prime loans. Subprime loans can have much higher origination fees and a 3% charge for origination tends to be a subprime mortgage origination fee. Typically, loan origination fees are charged by the lender to cover the cost of originating the loan.

Loan origination fees are not discount points.

Discount points are used to buy down the rate of the loan. A point is simply one percent of the loan. Discount points and regular loan origination fee are both expressed in percentage of the loan amount.

Lenders sometimes show a low loan origination fee on the GFE (good faith estimate) disclosure statement, but charge more in other fees to compensate for it. Or, they may choose to include additional underwriting fee, document processing fee, express mail fee, etc. in the loan origination fee. In both cases, the borrower is made to believe they are charged less for one thing or another, when in fact it's nothing like this.

Avoid getting charged twice with a typical mortgage loan origination fee and other loan costs.

Request from the lender to be more specific about all loan related fees - what you should be interested in as a borrower is the total closing costs of the loan, so that you can make a reliable decision.

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