Loan origination
Loan origination refers to the initiation of the loan application process, when a borrower submits their financial information to a bank or lender for processing. Depending on documentation type, a borrower will have to supply certain credit, asset, occupational, and housing information to a specified bank or lender to initiate the underwriting of the loan application. Along with that, the borrower will have to sign forms that allow both the broker and bank or lender to pull credit and release information about the borrower. The broker or bank may also make a binding contract with the borrower at this time, so it’s important to know what you’re getting into before signing any forms that come your way.
Loan originators are also known as loan officers, brokers, or simply salespeople. And fees associated with the origination of a loan are called loan origination fees, otherwise known as discount points. This fee is paid to the loan officer or broker who initiates and completes the loan transaction with the homeowner, and is paid out once the loan funds. Brokers and banks may or may not charge an origination fee depending on the terms of the deal. All fees should always be fully disclosed on the Good Faith Estimate and Hud-1. Pay close attention to this figure to see exactly what you’re being charged. Most upfront banks and brokers will charge 1% of the loan amount, although you can usually avoid this fee if you shop around.
