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Origination fees are charged by the lender in exchange for processing and originating a mortgage loan. The exact amount of these fees varies by lender, but you’ll pay them as part of your closing costs when you finalize your home purchase or mortgage refinance.
In this post:
- What are mortgage origination fees?
- How much can the origination fee cost you?
- Do you have to pay origination fees?
- Ways to avoid paying the mortgage origination fee
What are mortgage origination fees?
Origination fees are designed to cover the processing costs associated with your mortgage and usually include costs like:
- Underwriting/processing fees
- Discount points
As a buyer, you’ll see origination fees listed on Page 2 of any loan estimate you receive (under the section titled “Origination Charges.” You’ll also pay origination fees if you apply to refinance your mortgage.
Learn More: How Long Does It Take to Buy a House?
How much can the origination fee cost you?
Origination fees vary. Generally, though, they average around 0.5% to 1.5% of the total loan amount — so $1,000 to $3,000 on a $200,000 home loan.
Keep in mind, origination fees can consist of a number of different charges. Here’s a quick look at typical fees for each of these:
|Underwriting / processing fee||$895 - $1,145|
|Discount points (optional)||1% of your total loan amount per point|
|Note: All numbers here are lender fees on the Credible Operations, Inc. platform.|
Do you have to pay origination fees?
Origination fees have to be paid — but not necessarily by you. In some cases, you might be able to ask the home’s seller to cover these costs (called “seller concessions”). Sellers may be willing to foot the bill if:
- The home’s been on the market a while
- There’s not much demand from other buyers
- The property is in disrepair
- They simply need to move on and cash out quickly
Lenders can also cover origination fees, though you’ll pay for this help down the line. In this scenario, the mortgage lender would give you what’s called “lender credits” to cover some or all of your closing costs, and in exchange, you’d agree to a higher interest rate or bigger loan.
Find Out: How Much Does It Cost to Buy a Home?
Ways to avoid paying the mortgage origination fee
There’s no way to avoid mortgage loan origination fees entirely. Whether you pay them with upfront cash or not, the charges will be paid somehow — either by the seller or through a higher interest rate or bigger loan amount.
There are ways you can lower your origination fees and make your home purchase more affordable, though. To do this, you can:
- Shop around: Origination charges differ greatly from one lender to the next. Make sure you get loan estimates from at least a handful of lenders to ensure you’re getting the best deal on your origination fees.
- Negotiate: Since origination fees are in-house charges, lenders actually have the power to negotiate on these. They might be more likely to do so if you have a great credit score or large down payment (as this means you’re a lower-risk borrower and likely won’t default on your loan).
- Ask for help: Aside from asking the seller or your lender for help, you might also ask friends and family to help offset some of your origination costs if you’re in a bind.
In some cases, a lender might not charge any origination fees at all. This is more common with online lenders that have less overhead than bigger banks and financial institutions (and it’s another reason it’s critical you shop around when getting a mortgage pre-approval).
If you’re ready to start looking for a home loan, Credible Operations, Inc. is a good place to start. We will help you compare prequalified rates from multiple lenders, including their origination fees, all with no obligation.