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When shopping around for a mortgage, you’ll find that many mortgage lenders charge an origination fee, which is the cost to cover processing and underwriting the loan. You’ll also find that some lenders don’t have this fee at all, or can discount or waive it for certain customers. Here is Bankrate’s guide to the best mortgage lenders with no origination fee in 2022.
To determine the best mortgage lenders with no origination fee, Bankrate evaluated lenders based on several criteria, including affordability (APR, credits and fees); borrower experience (e.g., online preapproval); and scope of loan offerings.
Best mortgage lenders with no origination fee
|Loan products||Purchase and refinance; conventional, jumbo, FHA, bridge loan|
|Credit requirements||620 for conventional loans|
|Highlight||Better.com never charges fees or commissions on its loan products.|
|Loan products||Purchase and refinance; conventional, jumbo|
|Credit requirements||620 for conventional loans; 700 for jumbo loans|
|Highlight||Ally Bank simplifies the homebuying process with a digital mortgage experience, minus lender fees.|
PenFed Credit Union
|Loan products||Purchase and refinance; conventional, jumbo, VA, home equity line of credit (HELOC)|
|Credit requirements||650 for conventional loans; 620 for ARMs; 660 for HELOC; 700 for jumbo loans|
||Loans only available to PenFed Credit Union members|
|Highlight||PenFed Credit Union offers a $2,500 lender credit on select fixed-rate, adjustable-rate and VA mortgage products.|
What is an origination fee?
An origination fee is an upfront fee a lender charges to cover the cost of initiating and processing a loan. This one-time fee compensates the lender for services such as gathering the borrower’s information to process and fund the loan, and, in the case of a mortgage, handling escrow.
Some lenders also include the cost of underwriting — the risk assessment the lender does for every borrower — in the origination fee, while others charge a separate processing or underwriting fee.
Origination fees exist for many types of loans, including mortgages and personal loans.
How much is the origination fee?
Mortgage origination fees are based on a percentage of your home loan, and in general, you’ll pay anywhere from 0.5 percent to 1 percent. So, if you were to take out a $350,000 loan, the origination fee could set you back $1,750 to $3,500.
This fee is part of your closing costs, which are all of the costs associated with the mortgage, including the appraisal, credit check and other fees. All told, closing costs usually tally up to 2 percent to 5 percent of your loan.
You can find the origination fee for your specific mortgage on the loan estimate, the three-page document given to you by your lender when you applied for the loan.
Why do lenders charge origination fees?
Origination fees compensate the lender for services such as gathering the borrower’s information to process and fund the loan, and, in the case of a mortgage, handling escrow.
Is the origination fee negotiable?
You might be able to negotiate the origination fee by simply asking the lender to reduce the cost or waive it, especially if you’re a strong borrower with good credit. This might also be an option if you’re obtaining a loan from a bank or credit union that you already have a relationship with.
Another way to get out of paying the origination fee is to ask the home seller to cover it — although this tactic typically only works in a buyer’s market, when sellers have fewer offers to choose from, or if the seller needs to move quickly or has had a hard time unloading the property.
Some lenders also offer no-closing-cost mortgages, which include the cost of the origination fee in the loan itself. This can be a good route to take if you don’t have a lot of cash available for closing costs upfront, but be aware: You’ll pay more for your loan overall.
Summary: Best mortgage lenders with no origination fee
With additional reporting by Allison Martin