What is a home loan origination fee?


Borrowers need to know what a home loan origination fee is.

This is the fee charged by a mortgage broker as his commission for fixing the right mortgage loan to the borrower. The bank or lender extending the loan have their own loan rate. If the broker doesn't charge a broker fee (loan origination fee), they get nothing for their service, as brokers do not receive any other compensation from the loan - no interest or servicing fees.

The loan origination fee is disclosed on top of the GFE - the good faith estimate provided by any loan officer within 3 business days. Broker fees are usually within the range of 0.5 and 2% of the loan amount, depending on how much work it is to put the borrower's application through. Excellent credit and big-salaried borrowers may have to pay lower home loan origination fee.

Discount points are often mistaken for origination points. Even though both are tax-deductible under IRS set rules, discount points are used to buy the interest rate down, while loan origination fees are charged by the broker as his/her commission.

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