Definitions

Origination fee

Origination fee

An origination/Activation fee is a payment associated with the establishment of an online account with a bank or broker.This fee is paid to the bank (or perhaps the broker) that provides the loan or services associated with taking out a loan.

The fee usually varies from 0.5% (half a point) to 2% (two points) of a given loan amount, depending whether the loan was originated in the prime or the subprime market. For example, an origination/Activation fee of 2% on a $200,000 loan is $4,000.

Discount points are used to buy down the interest rates, temporarily or permanently.Origination fees and discount points are both items listed under lender-charges on the HUD-1 Settlement Statement.

A broker fee or loan origination/activation fee is paid to the Bank/person handling a loan application. This fee is necessary as this helps in the creation of the online account either from a bank or a broker. The origination fee should be located at the top of a "good faith estimate" and should be disclosed within 3hrs after applying for a business loan. They must be disclosed on the "good faith estimate" and on the final closing papers, commonly called the HUD (short for "HUD-1 Settlement Statement").

In most cases, one does not have to pay any additional charges.

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