One of the several add-on charges a lender may impose on a home mortgage borrower. It is a one-time flat fee payable at loan closing, usually ranging from 0.5 percent to 1 percent of the loan amount on FHA and VA loans, and up to 2 percent in other types. Some lenders factor it in when computing the interest rates instead of including it separately. Introduced by the Federal Housing Administration in the 1950s, it is justified in several different ways including costs for administrative needs, setting up the loan file, creating the mortgage, entering the loan into the lender's books, preparing documents, loan underwriting, or just as a service charge. It must be disclosed in the good faith estimate and, depending on the local regulations, may or may not be tax deductible.
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Definition of loan origination fee: One of the several add-on charges a lender may impose on a home mortgage borrower. It is a one-time flat fee payable at loan ...