How Are Mortgage Loan Origination Fees Calculated?


Quick Answer

Mortgage loan origination fees are generally calculated as a percentage of the total of the home loan; usually this total is between 0.5 and 1 percent, according to Investopedia. For example, if the lender charges a 1 percent origination fee, then the fee on a $200,000 mortgage is $2,000. Essentially, the origination charge is the bank's charge for getting the loan for the borrower.

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Full Answer

Origination fees are included on the good faith estimate, or GFE, that is given to borrowers, notes Mortgage Porter. The charge is listed under Your Adjusted Origination Charge and is not the same thing as discount points, which are fees paid to get a better, lower interest rate. Origination fees include fees for underwriting, administration, processing and document preparation. Other fees may include wire transfers, lender inspections, appraisals and other such fees.

Loan origination fees are essentially the bank's commission, paid out only if the loan is actually funded, reports The Truth About Mortgage. Some banks list a total of origination charges that may include other fees beyond the loan origination fee. For example, an underwriting fee and a processing fee, both of which may be more than the origination fee, may be grouped together and listed under origination charges, even though just one fee is the actual loan origination fee.

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