What is an origination fee and why do lenders charge them?

An origination fee is an upfront fee a mortgage 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 sometimes handling the escrow account as well.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 typically based on a percentage of your home loan. In general, you’ll pay anywhere from 0.5 percent to 1 percent. If you were to take out a $350,000 loan, the origination fee could set you back $1,750 to $3,500.

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.

Best mortgage lenders with no origination fee in 2024

Written by

Andrew Dehan,

Edited by

Suzanne De Vita,

Reviewed by

Shashank Shekhar,

Expert verified

Published on January 04, 2024 | 4 min read

Bankrate is always editorially independent. While we adhere to strict , this post may contain references to products from our partners. Here's an explanation for . Our is to ensure everything we publish is objective, accurate and trustworthy.

Credit: kate_sept2004/Getty Images; Illustration by Issiah Davis/Bankrate

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 2024.