Loan Origination Fee

loan origination

Loan origination refers to the initiation and completion of the home loan process, which begins when a borrower submits their financial information to a bank or mortgage lender for loan processing.

Depending on documentation type, a borrower will have to supply certain credit, income, asset, and employment 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 the mortgage broker (if applicable) and bank or lender to pull a credit report and release information about the borrower.

Once the information is submitted to the appropriate bank or lender, an underwriter will decision the application, either approving, suspending, or declining the loan.

Today's Rates

To sum it up, loan origination is simply the creation of a mortgage. It may begin with a phone call, an e-mail, a mortgage rate quote, or a referral from a real estate agent.

Loan Originators Are Salespeople

  • The phrase loan originator
  • Is just another way of saying a loan officer
  • Or a mortgage broker
  • It is the individual who helps you get a home loan

So who’s behind all this loan origination anyways?

Well, loan originators of course. They’re also known as loan officers, mortgage brokers, loan specialists or simply salespeople. Or some other cute name a company comes up with like “loan hero” or “loan scientist.”

These originators may work on behalf of individual mortgage brokers, or for large retail banks that originate thousands of mortgage loans each month.  (See mortgage brokers vs banks for more on that distinction).

Either way, their main job duty is to get you in the door and persuade you to apply for a mortgage with them, whether it be a purchase money mortgage or a refinance.

Now this isn’t to say that they’re pushy salespeople, it just means their highest priority is “getting a sale.”

They can also be quite helpful in guiding you through the home loan process, largely because both your incentives and theirs are aligned.  You want your loan to close and they get paid when it does. So everyone is on the same page.

What Are Loan Origination Fees?

  • These are the fees paid to obtain a mortgage
  • That represent the commission earned
  • By the loan officer or mortgage broker
  • In exchange for funding your loan

The fees associated with the origination of a home loan are called, you guessed it, loan origination fees.

They are typically referred to as mortgage points, which are expressed as a percentage of the loan amount.

For example, if the loan amount is $100,000, and you see a $1,000 loan origination fee on the paperwork, the bank or broker is charging you one (1) mortgage point.

If they’re charging $2,000, it would be two points. And so on…

This “loan origination fee” is paid to the loan officer or broker who initiates and completes the loan transaction with the borrower, and is only paid out if and when the mortgage loan funds.

The origination fee covers their commission for getting you a home loan, often because they aren’t paid a salary or base pay. And they aren’t working for free.

Origination Fee vs. Points

  • While origination fees are often expressed as points
  • You may pay points for other reasons
  • Such as to lower your interest rate
  • In this case they are actually known as discount points and not commission fees

While we’re on the topic of points, I want to clarify that origination fees and points aren’t necessarily the same.

While origination fees are often represented as points, it’s possible to pay discount points as well, which have nothing to do with commission.

If you want to buy down your mortgage rate, which is totally optional, you’ll pay these discount points at closing.

This could be on top of any commission paid to the originating bank or broker for helping you obtain your loan.

For example, you could pay one point to lower your rate and another point to the bank/broker to cover their commission. In total, you’d pay two points, but for two different reasons.

Are They Just Junk Fees?

  • Loan origination fees aren’t necessarily junk fees
  • They are commissions paid out for helping you obtain a loan
  • And just because you aren’t charged the fee directly
  • Doesn’t mean it’s the best deal

The loan origination fee is not necessarily a junk fee seeing that many loan originators don’t get paid salaries, as noted. So they need to get paid somehow.

But some lenders may not charge them and refer to them as unnecessary or excess charges as a result. However, if they don’t charge you directly, it just means they’re making money a different way, perhaps via a higher interest rate and/or by charging other lender fees.

Certain mortgage bankers can earn a service release premium (SRP) after the loan closes by selling it to an investor on the secondary market. This isn’t a fee imposed on the borrower directly, though a higher-rate mortgage may fetch a higher SRP.

In any case, someone will be making money for originating your loan, as they should for providing a service. So don’t get fired up about it, just try to negotiate costs lower as best you can. Or go elsewhere for your loan if you’re not impressed.

The reason it’s sometimes given junk fee status is that it’s often a fixed percentage, which means it’s not necessarily tailored to your specific loan or the amount of time/risk involved.

For example, why should a bank charge the same 1% fee on both a $200,000 loan amount and a $700,000 loan amount if the work is basically the same?

This would mean our first borrower would only be charged $2,000 for a mortgage, while the second borrower would be charged a staggering $7,000, which is nearly 4x the commission.

If these fees were based on a dollar amount instead, skeptics may not consider them junk. Or may think they’re less junky.

A new group of fintech mortgage lenders are often waiving the origination fee and/or not charging it to begin with, which may signal its eventual demise.

Breaking Down the Loan Origination Fee

origination charges

This is a screenshot of an actual Good Faith Estimate (since replaced by the Loan Estimate), which displays the adjusted origination costs.

In the example above, the loan origination charge is $1,840 on a $348,000 loan amount, which makes the fee roughly half a percentage point (.50%).

This particular broker charged a $250 origination charge, a $695 processing fee, and an $895 underwriting fee, which combined make up the $1,840 total.

Note that these fees are represented as one lump sum on the Good Faith Estimate, so ask for a breakdown to see what you’re actually being charged. Or refer to your Fees Worksheet.

fees worksheet

The corresponding Fees Worksheet pictured above breaks down the origination charges so you can better understand what you’re being charged and why.

Although not pictured here, lenders typically display a percentage on the same line as the Loan Origination Fee, such as 1.000%, if applicable. This will give you a better idea as to what you’re actually being charged.

Now let’s refer to the top screenshot again. Our borrower also received a lender credit of $3,076.32, which offset the entire origination charge and more, resulting in an adjusted origination charge of -$1,236.32.

This amount was put toward other closing costs, reducing the borrower’s out-of-pocket expenses.

Check Page 2 of the Loan Estimate or Closing Disclosure to See What You’re Being Charged

Loan Costs

On the newer Loan Estimate (LE) or Closing Disclosure (CD) forms, you’ll see this information on page 2 of either form under the section titled “Loan Costs.”

There you’ll find the Origination Charges, which may include a flat fee and/or a percentage of the loan amount represented in points.

In this example, the borrower was charged an eighth (0.125%) of the loan amount in the way of discount points and an administration fee of $1,495.

The fraction of a point may have lowered their interest rate slightly, while the so-called admin fee covered typical lender services like underwriting and processing.

Average Loan Origination Fee

  • The most common fee is 1% of the loan amount
  • Which means the cost can vary considerably
  • Based on the size of your home loan
  • Though you may see both higher and lower (or no) fees charged

In the mortgage world, it’s hard to provide universal answers, seeing that mortgages can differ tremendously.  The loan origination fee can vary based on who you decide to work with, the types of loans in question, and how complicated your loan is.

If you’ve got a cookie-cutter loan that you can get anywhere, this fee should be low.  The opposite is also true.  Either way, the loan origination fee is negotiable!  And it can be offset using a credit, as seen above.

If I had to throw out a number, I’d say the most common origination fee is 1% of the loan amount, which many banks will include in the fine print next to their advertised rates.  Wells Fargo used to include this exact disclaimer on their mortgage rates page, but it has since been removed.

Some banks and lenders may not even charge an origination fee explicitly, though a variety of closing costs such as underwriting and processing could amount to a comparable fee when all is said and done. That’s basically what we saw in the fees worksheet above.

Maximum Loan Origination Fees

  • Many mortgages today are capped
  • In terms of what lenders and third parties may charge
  • This limits how much you’ll pay
  • But it can still be up to 3% of the loan amount in most cases

Most types of mortgage loans don’t cap the fees lenders may charge borrowers.

However, many of today’s mortgages, especially those backed by Fannie Mae and Freddie Mac, are so-called Qualified Mortgages, which afford lenders certain protections.

In order to meet this definition, total upfront points and fees may not exceed 3% for loan amounts of $100,000 or more. This essentially limits what a lender can charge in the way of fees, though it’s still fairly accommodating.

If lenders don’t care to meet the QM rule, they can charge whatever upfront fee they’d like.

The U.S. Department of Housing and Urban Development (HUD) used to limit the maximum loan origination fee to 1% for FHA mortgages, but eliminated that rule for loans originated on or after January 1st, 2010.

The move aligned with changes to the Real Estate Settlement Procedures Act (RESPA), which required the sum of all fees and charges from origination-related services to be included in one box on the Good Faith Estimate (GFE).

HUD assumed the new consolidated figure representing all compensation to the mortgage lender and/or mortgage broker for loan origination would likely exceed the specific origination fee caps previously set for government programs.

However, HUD said at the time that the rule change wouldn’t be a free-for-all for mortgage lenders and brokers to charge whatever they please going forward.

There is still a maximum fee that may be charged on an FHA reverse mortgage, which is the greater of $2,500 or two percent of the maximum claim amount (MCA) of the mortgage, up to $200,000, plus an additional one percent for any portion greater than $200,000.

A maximum of $6,000 in origination fees may be charged on FHA reverse mortgages, regardless of the total loan amount.

And if you’re taking out in a VA loan, a maximum origination fee of 1% remains in place.

Smaller Home Loans May See Higher Fees Percentage Wise

  • Because the loan origination fee is percentage-based
  • It will be higher on smaller loan amounts
  • All else being equal
  • To ensure the originator is paid adequately since most loans require a similar amount of work

Also consider that for smaller loan amounts, a larger loan origination fee will need to be charged, seeing that it’s expressed as a percentage and won’t go nearly as far as a similar percentage on a large loan.

For example, a $100,000 loan amount with a 1% fee is only $1,000, whereas a $400,000 loan amount with the same 1% fee would be $4,000. And both loans could require the same amount of work.

In fact, sometimes the smaller mortgages can be even more a burden to close. So consider the dollar amount as well.

With regard to Qualified Mortgages, a higher 5% max fee is allowed for loan amounts between $20,000 and $60,000.

You May Not Be Charged an Origination Fee

  • The fee is totally optional
  • Some lenders simply don’t charge it
  • While others may allow you to waive it
  • Just pay attention to the interest rate and closing costs to determine if it’s a good deal

Brokers and banks may not even charge a loan origination fee directly to the borrower, depending on the terms of the deal.

A true no cost loan doesn’t include a loan origination fee paid for by the borrower because it’s an out-of-pocket expense.

While you may not pay the fee, your interest rate will likely be higher as a result, all else being equal. Loan originators have to make money somewhere, so if there is no fee charged on the front-end, they’ll make up for it on the back-end. Or when they sell the loan off to an investor.

As noted, they can earn their commission when they sell the loan off to another company after closing. As such, it doesn’t need to be revealed because it’s not yet known what this figure is.

Either way, all lender fees that are being charged should always be fully disclosed on the Loan Estimate (LE) and Closing Disclosure (CD). Pay close attention to this figure to see exactly what you’re being charged, whether paid out-of-pocket or via a higher-than-market interest rate.

Most upfront banks and brokers will charge no more than 1-2% of the loan amount, although this can vary by loan amount and by lender.  If you shop around, you may be able to avoid the loan origination fee altogether, and get that low rate you’re after!

Lastly, compare the origination charges, all lender fees, AND your interest rate among different banks and lenders to get the complete picture.  Looking at just one or two of these figures won’t provide an accurate assessment as to whether it’s a good deal or not.



80 Comments

  1. Colin Robertson November 21, 2017 at 10:05 am -

    Corri,

    Is the property you’re financing mixed-used? If so, the lender might charge a fee for it and list it under their origination charge. Best to ask them for clarification so you know exactly what it is.

  2. Corri November 21, 2017 at 6:32 am -

    What is a mixed used charged in an origination fee?

  3. Colin Robertson June 13, 2017 at 6:25 pm -

    Pete,

    It sounds like they’re charging you about 2 points…whether this is good or bad depends on what other fees you were charged, if any, and also the attributes of your loan and you as a borrower. Also keep in mind that a smaller loan amount earns less on a per percentage point basis, so 2 points may sound like a lot but might not be a lot. Consider a $500,000 loan amount – one point would be $5,000. One way to determine if it’s high is to get other quotes.

  4. Pete June 13, 2017 at 12:00 pm -

    I have a 169K loan that I am refinancing at 3.25%. There is a $3300 origination fee. This is cookie cutter loan, simple and to the point. My credit is 690, is this a practical origination fee?

  5. Sandra Vizcarra June 6, 2017 at 4:28 pm -

    Hello Colin, I have a question I’m in the middle of refinancing my home & unfortunately my credit & as well as my husbands is not very good & after several attempts to refinancing we finally got approved. Our whole goal was to refinance in order to due a debt consolidation. When reviewing our disclosure documents of the loan break down there is a fee titled “Urban home insurance” of $3,482.00 after all the other broken down fees the total cost of refinancing fees total about $11,000.00. That seems crazy high. We are in Arizona so I’m not sure if that is normal. Our total loan amount refinanced is only $172,000.00. Could these fees be right.

  6. Colin Robertson May 30, 2017 at 2:58 pm -

    Scott,

    That’s up to you…other options might include a HELOC or home equity line. Would depend how long you would need the financing, what the rates are, closing costs, prepayment rules, etc.

  7. Scott May 29, 2017 at 1:14 pm -

    I am looking to buy a house in the next 60 days. I have 2 houses that are paid off. I understand that Cash is king when buying a house in Denver, where the real Estate is hot. Credit is around 800. Is it best to get a cash out mortgage on the 2 properties and use the cash for the new house. Any ideas>?Thanks
    Scott

  8. Colin Robertson May 26, 2017 at 4:30 pm -

    Aimee,

    They all appear to be pretty standard fees, though if you shopped your title and escrow you’d maybe be able to get some of these costs lowered. If you google each one you’ll see what they all are and why a lender would require them.

  9. Aimee May 25, 2017 at 1:38 pm -

    Dear Colin:

    I’m considering a 15-yr convtl refi on $137k at 3.25% fixed in NJ. I’m already with this lender who’s servicing it. There are fees for Appraisal ($480), HOA cert ($250), Closing Protection Letter ($75), Lender’s Title Ins ($383), Settlement Fee ($325), Title Endorsements ($100), Title Exam ($100), and Upper Ct Lien Search ($16), Recording ($270). I don’t understand why these are necessary, but I don’t want to ignorantly ask to cut something that’s standard. Please identify what is unnecessary. Thanks!

    Aimee

  10. Colin Robertson May 20, 2017 at 7:14 am -

    Joni,

    Thanks for a nice comment! That’s why I keep answering…

  11. Joni May 19, 2017 at 7:29 pm -

    I am looking to refinance my home. I have about 100k equity in the home and originally locked in a rate 5.5 interest. I dont actually have a question for you but I wanted to give you praise on being a source for all those out there with questions. Thanks for all the valuable information on this site.

  12. Colin Robertson May 1, 2017 at 11:11 am -

    Ken,

    You may want to check your paperwork, but it sounds like something they should refund because they screwed up. It might take some jostling between you and them to get the money though…consumers now have the CFPB to make complaints to if lenders aren’t being aboveboard.

  13. Ken schwenk April 26, 2017 at 11:33 am -

    I was charged a $500 fee to get the GFE started…was told it would be refunded when loan was approved…because of 2 errors on behalf of the mortgage broker, loan was not approved…is this fee refunded??

  14. Colin Robertson March 18, 2017 at 2:17 pm -

    Jim,

    Some lenders charge an outright origination fee while others might charge you itemized fees for application, processing, etc. in place of that fee, just a different approach. The title stuff is between you and the title company, and your lender will probably say you can shop around for different quotes if you’d like. Looks like title insurance policies and a closing fee (the actual legwork involved via escrow). May want to inquire about the real estate fee to what exactly that is and why it’s being charged. Good luck!

  15. Jim March 18, 2017 at 12:34 pm -

    Hi Colin
    Great info….Id appreciate your input as to what is legit and possible junk fees.

    Im putting down 600k on an 800k home. I have 820 FICO no long or short term debt.

    Should I be required to have escrow collected by my lender?

    What is difference between loan application fee of $570 and and loan processing fee of $995.
    Under Title charges broker indicates following
    closing fee of 975 in addition to owners and lenders title policies
    (2700 + 700)

    Also there is a $295 real estate admin fee ?

  16. Colin Robertson February 23, 2017 at 10:25 am -

    John,

    What fees did you feel were high? The LO fee appears to be very low at just a fraction of a percent. Nothing seems exorbitant as far as I can see, though as you mentioned, lenders will often credit closing costs. But that may result in a higher interest rate, which is the trade-off. You could ask what services you can shop and see if there’s a cheaper provider they and you feel comfortable with using instead.

  17. John L February 22, 2017 at 10:22 am -

    Hi Colin,

    I am purchasing a home in California.
    I am dealing with a direct lender [the largest direct lender] and I feel that their fees are too high. Can you please review and confirm? The fees are about 1.3% of the purchase price.

    I have shopped around and some direct lenders have lower fees and even provides closing cost credits.

    It’s just that dealing with this major lender has been such a more simple/ efficient online/email process compared to other lenders who take up so much of my valuable time insisting on phone calls.

    Thank you for your input.

    Purchase Price – $480,000
    Loan Amount – 384,000
    Down Payment – 96,000 [20%]

    Origination- $1049
    Appraisal fee/credit report/appraisal management/ flood determination fee – $761
    Title cost – $2470
    Recording fees and transfer taxes – $609
    Pre-paids – $793
    Escrow – $432

  18. Colin Robertson December 13, 2016 at 10:43 am -

    Shanta,

    On a small loan balance a higher percentage could actually equate to less in fees. For example, 1% of $500,000 is $5,000, whereas 1% of $100,000 is just $1,000, and it may require the same amount of work to close…

  19. Shanta December 12, 2016 at 11:03 pm -

    Hi Colin

    Im in Alabama and I am in the process of purchasing a home in the amount of $68k. I am getting a 203(b) with escrow repairs in the amount of $3245. I just recieved my loan estimate and my origination fees are $1,493. Is charging over 2% on a small amount financed normal on these type of loans?

  20. Colin Robertson December 9, 2016 at 10:00 am -

    Danie,

    I doubt any lender would talk you out of using them. I’ve heard mixed opinions of QL, but you’d really need to compare options to see who offers you the best deal (lowest rate and fees) and can close your loan in a timely fashion. Good luck.

  21. Danie December 8, 2016 at 11:43 pm -

    Hello Colin, My state is Texas. I have read several of the posted questions and responses. I understand the importance of asking questions of the lenders and doing research. A friend recommended using QL. She used their services in October 2016 and several of her associates/ friends have used QL as well. When I advised my realtor that the pre-approval is with QL she quickly discouraged me from using them and stated it is best to go local, that QL charges high fees. I asked QL and was told they would be better or lower then local banks, the only fee a lender can control is the origination and often times that can be negotiated. Your input would greatly be appreciated. Thank you in advance.

  22. Ginger November 12, 2016 at 12:11 am -

    Hi Collin
    I started a refinance process back in May I believe it was so long ago that I cannot remember the exact month. The loan officer said that it would be better if I took out cash which I really did not need or want but I agreed. My GFE has changed 3 or 4 times. My credit score is 805. Estimated closing costs were $1,564 (includes $2,263 in loan costs + $196 in other costs – $895 in lender credits. Estimated cost to close -$1,594. Original loan amount $376,000, interest rate 3.875%, monthly principal $1,768.09. Now I am getting ready to close and the loan amount is now $369,500, same interest rate and new monthly payment of $1737.53. The rate lock expired. New estimated closing costs $6,371 (includes $7,066 in loan costs + $155 in other costs – $850 in lender credits. Estimated cost to close $6,344. They just recently re-verified my credit with the 3 credit bureaus. On the final estimate they also increased what was charged for the appraisal from $425 to $605. It seems to me that this process has taken longer than necessary as documents were requested in a piecemeal fashion resulting in this prolonged period. Also, why have my fees increased so substantially? Am I responsible for the cash to close and can I back out of this loan? I am no longer comfortable with this company. By the way, they are the company handling my current mortgage that has been sold several times.

  23. Ruben November 1, 2016 at 9:20 am -

    My sister has two business for almost 10 years and owns the two properties, about $300′ each and a house approximately $400′ all paid off.
    But last year she default a mortgage loan with a bank and made a deal to pay only $40,000 of the remaining debt, of course her credit went bad to 640.
    Now she wants to buy a new property for a new business (all day care centers).
    Two banks already declined the loans. she has good cash flow and willing to put down 30% or more if needed.
    What will be your recommendation?
    Go to a another small bank or look on the internet to get the loan?

  24. Colin Robertson October 26, 2016 at 8:06 am -

    Kevin,

    The processing and underwriting fees are technically for loan processing and loan underwriting, whereas the loan origination fee (1% in your case) is the loan officer or broker’s commission. There are three separate jobs involved, uw/processor/salesman. Not everyone charges ALL these fees, though many do. You can always try to negotiate them lower.

  25. Kevin October 26, 2016 at 1:05 am -

    Hi Colin,

    We are planning to purchase a home at $295,000 and will need a loan of $236,000. The lender we are working with quoted us for the loan and after looking over the document we are confused on the origination fees. Can you help explain what the difference between “Loan origination fee” and the “uw/process fee”? Are we being overcharged? This is the listed fees from our loan officer.

    Origination Charges
    Funding Fee to BCF–$355
    Loan Origination Fee–$2360
    Processing Fee–$595
    Underwriting Fee–$795

    We are first time home buyers and do not want to be taken advantage of.

    Thank you,
    Kevin

  26. Colin Robertson October 4, 2016 at 10:07 am -

    Ofelia,

    I think you’re referring to a hybrid loan arrangement where one loan is fixed and the other is adjustable.

  27. Ofelia October 3, 2016 at 6:44 pm -

    what is a split loan? and what is the benefit of this to the client?

  28. Colin Robertson September 23, 2016 at 1:49 pm -

    Nicole,

    The old days were like that but if they were always going to charge you 1% then the rate just increased to cover your lender credit, not their commission.

  29. Nicole September 23, 2016 at 10:12 am -

    Hi Colin,

    Currently doing a refinance and locked in at 3.25%. We opted to take a .625 % higher rate. However the lender is still charging the 1% origination $3k + a lender credit of $8600. I always thought when going with a higher rate the origination is removed.

    Thanks

  30. Colin Robertson August 28, 2016 at 8:41 am -

    Mark,

    You may want to ask why they’re charging that high of a fee. The origination fee is limited to 1% on VA loans…maybe the fees are discount points or something else?

  31. Mark August 26, 2016 at 7:54 am -

    Hello, I am doing a VA refi and I don’t have to pay the VA funding fee because I’m a disabled veteran. I see the total they are charging is a 3% origination fee and that to me seems excessive. Can you comment? Thanks in advance! Mark

  32. Colin Robertson August 15, 2016 at 12:55 pm -

    Jean,

    I think the key here is ensuring lender costs stay below the 1% threshold.

  33. Jean August 10, 2016 at 11:47 pm -

    Colin, I hope you are still responding to this thread. I will be receiving my final closing disclosure tomorrow, for a loan that is to close on Monday, Aug 15th. They have already given me a GFE, but I’ve found some discrepancies. This is a VA loan. They are charging only $417 for origination fee, but have added a processing fee and an underwriting fee as itemized charges under the origination fee header. Should I negotiate this, because I looked up the regulation on VA loans (VA Pamphlet 26-7, Revised Chapter 8: Borrower Fees and Charges) and read they can not legally charge me for these two additional charges as itemized fees. I also read that they should not be charging me document prep fees, title closing fees and tax transfer fees, which they do have listed on my GFE, and there are no credits given to offset any of these costs. It would make about a $1000 difference in my closing costs. My credit score is 815, and they gave me a rate lock at 3.25%. What do you advise? Tell them I don’t agree to the terms, because they are not legal? Ask them to have the seller, or lender absorb those costs? I’m not sure. I realize they could have just charged me 1% of the loan as an origination fee to offset not being able to charge me the itemized fees, but since they have already disclosed the origination fee as $417, can they change it? The loan is for 166,900.

  34. Colin Robertson July 28, 2016 at 10:06 am -

    Cindy,

    Closing costs can be pretty high with prepaid items like taxes and insurance, along with what is needed to set up the escrow account. The cost of those items won’t change from lender to lender, only just when you have to pay them. If you’re paying it all upfront it can be hefty. Might want to look at the other costs and shop around to see if others can do better. And yes, you can negotiate with the credit union too.

  35. Cindy July 25, 2016 at 10:52 pm -

    We’re buying a home and financing $300K; the down payment from the sale of our current home will be $110K, so that’s well over 20% down. Our credit scores are in the mid-700s.

    We are accustomed to paying into an escrow account, and plan to do so for our new loan. We intend to borrow from our local credit union, where I’ve been a member since the 1970s. They’re offering a 30-year fixed-rate loan at 3.65% for long-term members.

    I received initial disclosures from our CU today, and was shocked at the closing cost estimate of nearly $24K. This included a 1% loan origination fee, lots of fees in the $250-650 range, and prepayment for a full year of both homeowners’ insurance (overestimated by a fair bit) and property taxes (also overestimated).

    This total represents about 8% of our loan amount. Is it just me, or does that seem really out of line? What are my odds of succeeding if I decide to push back on the fees with my CU loan officer?

  36. Colin Robertson July 18, 2016 at 9:00 pm -

    Jeff,

    I have an article dedicated to that very topic on the right sidebar menu of this page.

  37. jeff July 18, 2016 at 7:52 pm -

    Thanks for the response Colin. So I guess what I’m needing to know is, how do you optimize a refinance when it comes to “points”? Do I buy points, or do I go with lower points? I don’t understand the whole “points” thing, it sounds like a used car salesman gimmick to me, used to confuse the consumer with excessive numbers.

  38. Colin Robertson July 18, 2016 at 11:36 am -

    Jeff,

    You may want to break down the closing costs to see why they’re so high…it sounds like you might be paying discount points to get a rate that low…2.25% sounds really low.

  39. Colin Robertson July 18, 2016 at 10:24 am -

    Chris,

    Going from 68% to 79% LTV can definitely change pricing dramatically, as can a condo vs. SFR. And yes there are LTV pricing tiers that may adjust every 5% to 10%.

  40. jeff July 16, 2016 at 9:12 am -

    Please advise: My wife and I are looking to refi our primary residence with money out, and I was quoted $13,000 in closing costs (cash to close is $4,307. Origination charges are $7813) Loan amount is $250K, 15-year, at 2.25%. Both our credit scores are over 800. Are we getting ripped off, or is this negotiable? Not sure how to proceed. Thank you in advance for your advice.

  41. Chris July 15, 2016 at 3:41 am -

    Colin, I’m currently working with a lender that originally said no points or origination fees, we are ready to close and now they said I have to pay points because I’m in a condo and my LTV is at 79%. We originally thought it was at 68% LTV and a single family residence is a PUD. The points are .432% at 3.3% fixed rate for 30 years. Is that a good deal at today’s market value? Or is this a bait and switch?

    This is what my loan officer said, “I just looked in the system. It is because the LTV increased with the Lower Value of the home. The original Loan To Value was at 68.361 and now we are at 79.429. Pricing changes every 5% LTV. I will call you to review”.

    Does this sound right? Thanks
    Thank you.

  42. Grace July 12, 2016 at 10:54 am -

    Thanks for your reply.

    I asked him about it and he told me that I don’t have to worry about it coz the final closing costs will only be around $900.

    Thanks again…

  43. Colin Robertson July 8, 2016 at 11:41 am -

    Grace,

    Are you receiving $5,198 in cash out because your loan amount is going from around $140k to $150k.

  44. Grace July 8, 2016 at 8:23 am -

    Hi Colin,

    I am trying to refinance my home for $150,000 @3.500% with Wells Fargo.

    The Total Closing Costs = $4,655 (broken down as follows):
    Orig. Fee $995; Appraisal $430; Credit Report $11; Title Closing/Escrow $250; Title Clsg Protect Letter $75; Title Agent Reg Fee $3; Title Lender’s Policy $845; Title Search $175; Recording Fees & Taxes $227; Prepaid Interest ($14.38/day @3.500%) = $29; Initial Escrow Payment for 3 months = $1,653.

    I am wondering why they’re still charging another $5,198 for estimated cash to close TO BORROWER.

    Which makes the Total Payoffs go down to…
    $150,000
    – 4,655 Total Closing Costs
    – 5,198 Estimated Cash to Close TO BORROWER
    ————-
    $140,147 Total Payoff Amount
    ========

    Pls. help. Thank you so much…

    Grace

  45. Colin Robertson April 18, 2016 at 10:16 am -

    Heather,

    What do you mean it wasn’t originated?

  46. Heather April 14, 2016 at 4:30 pm -

    Colin,
    What would happen if my mortgage loan was not originated?
    Are there civil penalties?

  47. Colin Robertson April 4, 2016 at 7:00 pm -

    Ben,

    Hard to say but if nothing was signed it might just be them trying to recoup their costs and hoping you’ll pay in good faith. But if they can’t service you properly that might be a cost of doing business for them.

  48. Colin Robertson April 4, 2016 at 6:52 pm -

    Denise,

    I have a post dedicated to that very subject. Search my site and you’ll find it.

  49. Denise March 30, 2016 at 4:55 pm -

    Hi Colin, I cannot decide whether to go through a bank or a broker. Is it harder to get approved through a bank? Is it more expensive to use a broker? This is all so confusing! Thanks

  50. Ben Fox March 28, 2016 at 4:39 pm -

    Hi Colin I have decided to cut ties with my mortgage broker and finance my house through my local bank. With that said my mortgage broker is asking me to pay for the appraisal she had done for me. Do I have to pay her if I never signed any documents with her agreeing to the fee and I also have not given her my credit card or locked in a rate yet?

  51. Colin Robertson March 22, 2016 at 11:37 am -

    Diana,

    You may not be charged a loan origination fee out-of-pocket…it could be rolled into a higher interest rate. You can negotiate whenever you want, but the later it gets, the less leverage you have because lenders don’t expect borrowers to jump ship late in the game.

  52. Darias March 21, 2016 at 4:26 pm -

    Hi,
    when is the right time to start negotiating some of the prices? I have just started contacting mortgage brokers and I have gotten one Approximate Loan Cost Illustration (ALCI). This includes some of the costs mentioned here, processing, underwriting, but I don’t see a loan origination fee.

    It seems that because some of the costs are determined once you find a house, I may not know what they are until later, but perhaps later may be too late?

    Best,
    Diana

  53. Colin Robertson March 16, 2016 at 10:27 am -

    Ofelia,

    They probably have some overlap, and even if the terms aren’t quite identical, they might share much of the same meaning since lending doesn’t tend to differ all that much worldwide. I’d assume all home loans come with a cost to the borrower, what they call those costs may vary from country to country. In any case it’s probably best to know exactly what the bank is saying in your native country.

  54. Ofelia March 9, 2016 at 7:40 pm -

    Hi,
    Is australian and US mortgage has the same terminologies?

    Thanks,

  55. Colin Robertson February 28, 2016 at 2:37 pm -

    Ara,

    You can ask him to break down all the costs so you know exactly what they are and why. And ask exactly why they nearly doubled? Also can ask specifically why income was an issue for conventional, was it DTI, etc?

  56. Ara Gul February 26, 2016 at 8:23 pm -

    I just received a set of loan papers for $218,000 FHA loan; the closing costs shown to be just a tad under $12, 000 but all previous loan disclosure statements showed the closing costs half of the latest closing costs.

    The loan originator slashed my downpayment into half: it was about $11,000 now it is 3.5 percent. He claims the FHA loans have higher closing costs, and my income is not adequate for conventional loan.

  57. Colin Robertson February 16, 2016 at 11:53 am -

    Roxy,

    That 4.75% would equate to a $3,372.50 origination fee. On $300,000 mortgages it’s common to see 1% charged, which is $3,000. So it might not be as bad as it looks, but you can always shop around and see if you can do better. The interest rate seems to be very high, though I don’t know the details of your loan.

  58. Roxy February 15, 2016 at 9:12 am -

    Could you please tell me if a 4.75% Origination fee on a 71,000.00 loan is in good faith? They are also charging a 9.64% rate and 10.264% APR is there anything I can do about this?

  59. Colin Robertson February 14, 2016 at 3:46 pm -

    Ugi,

    There may be a discounted rate (reissue rate) for title insurance when refinancing, but it’s still necessary as far as the lender is concerned to protect them from any unknown liens, claims, lawsuits, etc.

  60. Ugi February 13, 2016 at 11:22 pm -

    Colin,

    I am starting a refi with my original lender. The closing costs estimate show fees for lenders title insurance and endorsements. Why do they need this when I am using the same lender as my present mortgage?

  61. Colin Robertson February 11, 2016 at 10:33 pm -

    Lucas,

    That’s $2,200. If the loan were $220,000, also relatively small, and they charged one point it’d be the same commission. So you really do have to consider loan amount to determine if the origination fee is expensive or not. You can always see what else is out there. It’s generally recommended to get multiple quotes to see what other lenders can offer as far as rate/fees.

  62. Lucas February 11, 2016 at 8:55 pm -

    Thanks for the prompt reply. The loan amount is only around $80k, so does that justify the 2.75% or should I still shop around?

  63. Colin Robertson February 7, 2016 at 11:04 am -

    Lucas,

    Generally a lender/broker will charge ~1 point or so for a reasonably sized loan, perhaps more if the loan amount is small because it wouldn’t be as much money for a similar amount of work. If you’re actually paying nearly 3 points out of pocket, as opposed to those points covering your closing costs, you may want to shop around and see if you can do better.

  64. Lucas February 5, 2016 at 2:56 pm -

    I received a mortgage origination disclosure document from the broker, and under “Mortgage Broker Fee (check one)”, it lists 3 choices and all 3 are checked.
    1. A fee of 2.75 of the principal amount.
    2. A flat fee of $_______________
    3. Lender or investor will pay the Mortgage broker a fee of $__________

    2.75% seems high, and then it looks like there are 2 more fees that they are not disclosing the amounts of. Have I read this wrong?

  65. Patty January 26, 2016 at 9:58 am -

    Thanks. I told them I was not willing to pay the appraisal fee upfront without any review beforehand to make sure I am eligible for loan. I received a response back saying, “I’ll cancel your application”. Really? So I wrote back and said, “That’s it? I guess you don’t want my business if you’re not willing to work with me”. I received a response stating that they would pay the appraisal fee and I am still waiting to hear back from them because I want something a little more concrete in writing than a Loan Estimate.

  66. Colin Robertson January 25, 2016 at 5:29 pm -

    Patty,

    May want to shop around, especially if you’re worried about the value coming in low and eating the fee.

  67. Patty January 21, 2016 at 10:12 am -

    Looking into refinancing. The broker told me that a new regulation for 2016 is that the borrower HAS to pay the appraisal fee upfront and have the appraisal before the underwriter reviews the loan. What happens if the underwriter comes back and says “no deal”?

  68. Colin Robertson January 16, 2016 at 5:35 pm -

    Santosh,

    Yes, it should only be charged if/when loan funds.

  69. santosh January 16, 2016 at 7:03 am -

    Hi Colin,

    Is loan origination fee refunded if deal falls apart, due to low appraisal or inspection issues etc.? Thanks!

  70. Armando Sanchez December 31, 2015 at 1:48 pm -

    Brokers have better Rates than Retail Lenders and have a lot more leverage than a Loan Officer. I have 2 Lenders that I Place loans thru. However My Rates by Far beat the Banks and Mortgage bankers because my Overhead is very minimal. Plus we can do Borrower Paid as well as Lender paid. This means more savings to the Buyers and Refinance customers. I can beat out the Best Banks in the US. I just took a Loan from Chase and the Buyer had 7 million dollars in that Bank. I still beat out their Rate and Fees to their Prime Borrower.

  71. Colin Robertson December 7, 2015 at 11:24 am -

    Lori,

    Hard to say without knowing any of the details…could be taxes/insurance/rate buy down/origination/etc. Not sure how divorce proceedings work, but wouldn’t it be fair for you to see a breakdown if he’s buying you out?

  72. Lori Anderson December 7, 2015 at 9:02 am -

    Colin,
    I am divorcing and husband is keeping the house. Cma done at 300,000. He is going to refinance. His attorney said fees to refi were 13,500.00. They won’t give me the paperwork. We owe 116,000. How can these fees be so high?

  73. Colin Robertson October 1, 2015 at 10:52 am -

    German,

    This fee is typically negotiable, but not sure how much leverage you’ll have if he did a bunch of legwork to make the numbers fit…he may doubt you’ll be able to go elsewhere for your loan, but you can always ask.

  74. German September 28, 2015 at 9:01 pm -

    Hi-

    Mortgage broker I’m going with is charging us 1.5% for origination fees- he went through some work to get us sapphire grant and make the numbers work on our loan. However according to him a 4.5 interest rate is set by the grantee? Is the origination fee negotiable/required to close deal?

  75. Colin Robertson September 2, 2015 at 3:21 pm -

    Emily,

    Money doesn’t come back, so what you don’t use is left on the table. See if any credits can be used elsewhere to get use out of the money.

  76. Emily September 2, 2015 at 12:30 pm -

    Collin,

    I recently closed on my house this week. The sellers covered up to $5,000 of the closing costs and the prepaids. The day of closing, my loan officer e-mailed me to let me know that she did the final approval on my FHA loan and that she took off $1,000 in closing costs. What does that mean? She told me that the lock on my rate had a discount point of .750 or $1,049 and that she waived the .750. Does this mean I will be getting some money back?

  77. Cazzo August 24, 2015 at 9:34 pm -

    Thank you Colin!

  78. Colin Robertson August 24, 2015 at 8:54 pm -

    Cazzo,

    I believe CashCall offered 125% LTV second mortgages, not sure if they still do. Or maybe a rehab loan where repairs are included in the mortgage.

  79. Cazzo August 23, 2015 at 11:02 pm -

    Good day Colin
    Is it possible to take out a larger mortgage loan then the actual price of the property? (For the above average credit score first time buyer). Thanks.

  80. ed mckeever July 21, 2015 at 1:31 am -

    I have a closing in six days. WELLS FARGO and they have not sent me a breakdown of my mortgage payment .the payment has changed 2 times by 20.00 dollars i paid 870.00 to lock in the rate. thanks

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