Loan Origination Fee

In depth

Loan origination fees compensate the lender or originator for processing the loan. One point equals one percent of the loan amount. Misconception: origination fees are not interest; they are charged upfront, separate from the ongoing interest rate, although they affect APR and Truth in Lending disclosures. Practically, in seller-financed transactions, sellers typically do not charge origination fees because they are not professional lenders. However, sellers using a licensed RMLO often pay an origination or processing fee that gets passed to the buyer. Section 32 and Higher-Priced Mortgage Loan rules count origination fees in points-and-fees calculations, so excessive origination fees can trigger heightened compliance. Always disclose origination fees clearly on the closing statement.