What Is Origination Fee?

An origination fee is a charge your lender collects for processing, underwriting, and funding your mortgage, typically ranging from 0.5% to 1% of the loan amount. This fee appears on your Loan Estimate and Closing Disclosure under origination charges. It is one of the primary ways lenders earn revenue on a mortgage transaction.

On a $400,000 loan, an origination fee of 0.75% would cost you $3,000 at closing. Some lenders advertise “no origination fee” loans but compensate by charging a slightly higher interest rate—typically 0.125%–0.25% more. Over 30 years, that rate increase could cost you more than the upfront fee, so always compare the total cost of each option.

Key Facts

• Typical range: 0.5%–1% of the loan amount
• Where it appears: Section A of your Loan Estimate and Closing Disclosure
• Negotiable: Yes—lenders may reduce or waive it, especially for strong borrowers
• Tax deductible: Origination fees may be deductible on your federal return if they qualify as mortgage points

Frequently Asked Questions

Is the origination fee the same as discount points?

No. An origination fee compensates the lender for processing your loan, while discount points are an optional upfront payment you make to buy down your interest rate. Both are listed separately on your Loan Estimate so you can see exactly what you are paying for.

Can you negotiate the origination fee?

Yes. The origination fee is one of the most negotiable closing costs. Ask your lender to reduce or waive it, especially if you have strong credit, a large down payment, or competing Loan Estimates from other lenders.