what is an origination fee on a mortgage

What Is an Origination Fee on a Mortgage?

One of the first things you’ll learn when buying a home is that the mortgage application process comes with several different steps and, unfortunately, fees. One of these is the origination fee.

As the best mortgage lenders in Tucson, Arizona, Altitude Home Loans knows that homebuyers tend to have a lot of questions about the mortgage application process. Here, we’ll answer, “What is an origination fee on a mortgage?”

Mortgage Origination Costs Defined

The origination fee helps cover different overhead costs that the lender has to pay when processing your loan. These can include payment for underwriters, appraisals, bankers, and more. By charging the origination fee, the mortgage company can earn more profit, generating enough money to provide mortgages to other homebuyers.

While an origination fee is common, not all mortgage lenders charge it. If you don’t see origination fees on your mortgage application, it’s likely because your loan has a higher interest rate.

Mortgage Origination Fee Explanation: How Does It Work?

What is an origination fee on a mortgage, and how does it work?

Unless you plan on paying with cash, you’ll likely need to apply for a mortgage when purchasing a new home. Like other types of loans, mortgages require you to pay additional fees during the application process, including the origination fee. 

Understanding mortgage loan origination fees starts with knowing how much they cost. Typically, a mortgage lender will charge between 0.5% and 1% of the total cost of your loan. For example, if your mortgage is $300,000 and your origination fee is 1%, you’ll pay $3,000 for the fee. 

A Breakdown of Origination Fees in Mortgages and Other Closing Costs

You will typically pay the origination fee with your other closing costs. Like the origination fee, the other closing costs are fees that help pay for the application process. Your lender determines the amount of these fees.

Although each lender will have a different fee structure, the following are the most common types of closing costs.

Application Fee

Separate from the origination fee, the application fee is a deposit that you get back when you close on your house. However, you may not get this money back if you don’t close, depending on the lender. 

Credit Check Fee

This fee is typically only $30 and covers the cost of the lender checking your credit score for the application process.

Escrow Fee

During the application and underwriting process, your money goes into an escrow account to protect your funds from unauthorized access. The fees help cover the costs of holding this account.

Get Help Decoding Mortgage Origination Fees With Altitude Home Loans

While applying for a mortgage includes several different steps, understanding what fees you’re responsible for paying and why they’re necessary can help you budget and enjoy a smoother process. 

What is an origination fee on a mortgage? To learn more about the importance of mortgage origination charges or the truth about mortgage loans, call Altitude Home Loans at (520) 500-1010. Get more information today.

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