What are "loan origination fees"?

Loan origination fees are essential costs associated with the process of securing a mortgage. They represent the fees that lenders charge to process a new loan application, which typically includes steps such as underwriting, administrative expenses, and other related services necessary to set up the loan. These fees are calculated as a percentage of the total loan amount and are paid at the time the loan is initiated.

Understanding this concept helps borrowers recognize that these fees are distinct from other costs such as closing costs, which encompass a variety of expenses that arise at the conclusion of a real estate transaction. While closing costs might include origination fees, they also involve title insurance, appraisal fees, and other transaction-related charges.

This clarity is important for buyers as they navigate financing options and prepare for the overall expenses of purchasing a property. Being aware of loan origination fees allows potential borrowers to factor this cost into their budgeting process when considering different lenders or loan products.