Origination fees are a standard component of mortgage closing costs. They cover the lender’s administrative work—underwriting, document prep and verification. Knowing how these fees work helps you compare loan offers, budget accurately and avoid surprises at closing.
Whether you’re a first-time homebuyer, refinancing to lower your rate, an investor assessing rental property financing, a renter evaluating future costs or a researcher analyzing mortgage components, this guide breaks down everything you need to know about origination fees.
An origination fee is a charge by a lender for processing your loan application. Expressed as a percentage of the loan amount—typically between 0.5% and 1%—it compensates the lender for underwriting, document preparation and borrower verification.
Unlike discount points, which are optional prepayments to reduce your interest rate, origination fees are mandatory lender charges. Processing and underwriting fees may be listed separately but often roll into the origination charge on your Loan Estimate.
Most lenders charge a percentage-based fee—0.5% to 1% of the loan amount. Some use a flat-fee structure, especially for smaller loan sizes or specialized products.
Typical origination fees range from 0.5% to 1%. Factors influencing your rate include credit score, loan type (conventional, FHA, VA), lender policies and overall loan risk.
Origination fees increase your Annual Percentage Rate (APR) because the fee adds to your total loan cost. A higher fee can push your APR above competitors’ offers even if the nominal interest rate is similar.
Closing costs include origination fees, appraisal, title insurance, escrow fees and more. Origination fees often appear as “Origination Charges” on the Loan Estimate under Section A.
You can pay the origination fee at closing or roll it into your loan balance. Financing it increases your monthly payments and interest over time, so weigh upfront savings against long-term costs.
Yes—origination fees are negotiable. Lenders expect some haggling, especially if you have strong credit or multiple competing offers.
No-fee loans waive origination charges but typically charge higher interest rates or hidden fees elsewhere. Always compare the APR and total closing costs before choosing.
On your Loan Estimate, look under Section A—“Origination Charges.” This section lists the lender’s fee, any processing or underwriting charges and other administrative costs.
The Closing Disclosure mirrors the Loan Estimate. Section A will show “Loan Costs” with origination fees itemized. Ensure they match the initial estimate or inquire about any discrepancies.
Generally, origination fees are not deductible as mortgage interest. They fall under loan costs rather than interest expenses.
The IRS requires detailed records of closing costs. While interest and points may be deductible, origination fees must be documented separately and are not claimed as interest.
No. Origination fees cover lender processing costs, while discount points are optional prepayments to lower your interest rate.
Origination fees typically range from 0.5% to 1% of the loan amount.
Yes, but rolling it into your loan increases your principal and results in higher interest costs over time.
It appears under Section A—“Loan Costs”—itemized as “Origination Charges.”
No. They are not considered mortgage interest and cannot be deducted.
Most do, but some no-fee mortgages exist. Always compare APRs and total closing costs to spot hidden charges.
Gather Loan Estimates from multiple lenders, budget for origination fees in your closing cost calculations and negotiate to secure the best overall mortgage package.
