Your mortgage loan estimate may include a charge for loan origination. This fee represents the cost to administer your application, and it varies by lender. Knowing what a mortgage origination fee is and how much it typically costs can help you be an informed homebuyer.
What Is a Mortgage Origination Fee?
Originating a mortgage includes services like underwriting, document preparation, loan processing and funding. Lenders usually charge a single origination fee to cover most or all of these items.
When you apply for a mortgage, there’s a lot going on behind the scenes. Like any business, mortgage lenders want to be compensated for their time and effort. The result may take the form of a mortgage origination fee.
“Often, you’ll find a mortgage company that charges an origination fee, so they make some of their profit from the start of the loan. They tend to have lower interest rates than mortgage companies that don’t charge one,” says Mark Worthington, a loan officer and branch manager at Churchill Mortgage in Oregon.
When you apply for a mortgage, you should get a loan estimate from your mortgage lender within three business days. In addition to your monthly payment and prospective interest rate, the loan estimate outlines lender charges, which might include an origination fee.
[Read: Best Mortgage Lenders]
How Much Is a Mortgage Origination Fee?
Mortgage origination fees are set by individual lenders. A common benchmark is somewhere between 0.5% and 1% of the loan amount.
Let’s review what that might look like. As of April 2025, the average sales price of new houses sold was $518,400, according to U.S. Census Bureau data. With a 20% down payment of $103,680, the loan amount would be $414,720. If the lender charges a mortgage origination fee between 0.5% and 1%, the fee would range from $2,073.60 to $4,147.20
While those numbers provide a general estimate, you should know that origination fees can be as low as zero. How high can they go? Most mainstream mortgages meet government “qualified mortgage” guidelines limiting total lender charges (including origination fees) to 3% of the loan amount for a loan of $100,000 or more. “Some people have a misconception that an origination fee is 1% of the loan amount. Which is not necessarily true,” says Christopher Thomas, a Michigan-based mortgage loan originator with Iris Mortgage.
While a mortgage origination fee is commonly expressed as a percentage of the loan, your lender may instead charge a flat fee. When comparing lenders, review all charges. And be on the lookout for other costs that may be disguised as origination fees.
“You’ll have some lenders that may say, ‘We don’t have any origination fee at all. But we have a $2,000 administration fee on all of our loans,'” says Worthington. Some mortgage lenders may use different terminology, such as underwriting fee or processing fee, to refer to basically the same thing as a mortgage origination fee.
In the end, what really matters is the total lender fees you pay and the interest rate you get for them. Both of those numbers are incorporated into your annual percentage rate, or APR.
[READ: Today’s FHA Mortgage Rates]
How Borrowers Can Pay a Mortgage Origination Fee
A mortgage origination fee, if you have one, is part of your closing costs. Your closing costs can include application and appraisal fees, home insurance, attorney fees, agent commissions and property taxes.
You’re responsible for paying the closing costs when you sign your final documents. You can do so with a cashier’s check or by setting up a wire transfer. In addition, there are ways to cover origination fees and closing costs without paying out of pocket:
— You can pay a higher interest rate in exchange for the lender covering some or all of your closing costs. “If I have somebody who’s tight on cash or sensitive to closing costs, I can bake or absorb the underwriting fee into the interest rate to make that zero,” says Thomas.
— If you’re refinancing, you may also have the option of rolling the costs into your new loan. Just be aware that this option is more costly in the long run due to the higher loan amount and interest charges.
— You can also attempt to negotiate your mortgage origination fee and see if your lender is willing to budge. Another option is to ask the seller to cover all or a portion of your closing costs. Often referred to as a seller concession, this could be a win-win situation. You may be better off having the seller pay your closing costs than negotiating a price break in the same amount. And it could help facilitate a deal faster for the seller.
[See: Best Low- and No-Down-Payment Mortgages]
What to Consider With Mortgage Origination Fees
When buying a home, consider your timeline and future goals. If you believe you’ll need the loan only for a few years, Worthington says that “lowering your closing costs or your origination fees is a primary thing you should work on.”
But if you’re planning to have the loan longer, you may take a different approach. “If someone says, ‘I’m going to keep this loan for five or 10 years in place,’ then the interest rate becomes more paramount. And what we’d like to do as lenders to help a client decide this is, we’ll run what’s called a break-even analysis,” says Worthington.
Comparing multiple loan offers is key, and Worthington recommends borrowers look at a minimum of three to four lenders. You’ll want to see how the mortgage origination fee and other closing costs vary and choose the loan with the lowest cost to you.
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What Is a Mortgage Origination Fee? originally appeared on usnews.com
