Residential Mortgage Application: Loan Origination Fees

When you are filling out a residential mortgage application, you are going to notice that your lender is charging you some type of loan origination fees. Here are a few things to consider about loan origination fees.

Loan Origination Fees

These fees are charged to compensate the bank for their services. The bank has to review your information and send it to an underwriter in order to make a decision about whether they should do business with you. This process requires them to utilize resources, and they need to be compensated in order to continue providing this service to potential borrowers.

Points

In some cases, you are going to have to pay origination points on your loan. Instead of a flat fee, they are going to charge you a certain percentage of the loan amount. In many cases, one point is going to cost 1 percent of the loan value. This should not be confused with discount points on a loan. A discount point is a type of prepaid interest that is designed to lower your monthly payment. This is strictly to compensate the lender.

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