What are “loan origination fees”?

Loan origination fees are specifically charged by lenders for the process of initiating and processing a loan application. These fees typically cover the costs associated with evaluating the borrower's creditworthiness, the underwriting process, and other administrative tasks necessary to facilitate the loan. It is common for these fees to be expressed as a percentage of the total loan amount, reflecting the lender's costs and profit for providing the loan.

Understanding loan origination fees is important for borrowers as these fees can significantly affect the overall cost of the mortgage. They are distinct from other related fees, such as those for appraisals or credit checks, which are separate services associated with obtaining a mortgage but do not represent the lender's primary fee for originating the loan itself. Thus, recognizing that these fees relate specifically to loan processing and application is key to understanding mortgage financing.