An origination fee is a fee commonly charged by a lender for processing a loan application. The origination fee may be presented in the form of points or a dollar amount. Each point is equal to 1 percent of the loan amount (e.g. two points on a $100,000 mortgage would cost $2,000).
One of the last steps in the home buying process is the closing. This is when the buyer and the seller sign all of the papers and complete the transfer of property. Aside from making the down payment, at closing you will be expected to pay some other fees, including the origination fee.
Origination fees are just one way that lenders profit from doing business with you. A loan application takes a considerable amount of paperwork, investigation and number crunching, which is why an origination fee can be so costly.
If you have any questions about what other fees you will be expected to pay, ask your lender, your real estate agent or attorney. That way you can prepare your finances and won’t be surprised by any costs.