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 2021.
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
Better.com is one of Bankrate’s best mortgage lenders overall and best online lenders. The lender doesn’t charge any fees and has a quick application and approval process, in part due to being online-only. In addition, the lender’s Better Price Guarantee gives you $100 if it can’t match a lower rate you receive from a competitor.
PenFed Credit Union
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Although you’ll need to be a member to take out a mortgage with PenFed Credit Union, the credit union doesn’t charge any fees on home loans, and can credit you depending on the amount of your loan: $500 if less than $200,000; $1,000 if between $200,000 and $699,999; and $2,500 if $700,000 or more. Conveniently, you can begin the application process online or by phone, or apply in person at a branch (if in your area). This lender only offers conventional, jumbo, VA loans and home equity lines of credit (HELOCs), however.
Like Better.com, Reali Loans utilizes technology to help you complete the majority of the mortgage application process online, and doesn’t charge any lender or hidden fees. While you can get prequalified and lock your rate instantly through the lender’s website, you can only apply for a conventional loan, and the lender is available in just 11 states (Arizona, California, Colorado, Georgia, Illinois, Michigan, Oregon, Pennsylvania, Texas, Virginia and Washington). Reali Loans is affiliated with Reali, which provides cash offers or trade-in solutions for sellers as well as homes for buyers, giving you the option of an end-to-end real estate experience.
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 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.
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.