What is an Origination Fee?

A common question among borrowers is, “What is the origination fee?” Depending on the source, borrowers may receive different answers. However, it is actually straightforward. An origination fee is there to protect borrowers, ensure they have a smooth experience, and overall it is a benefit to them. A loan is not simply initiated and approved. It is a process of confirming income, insurance, payment history, taxes paid, escrow, etc. It takes the efforts of many different people in multiple roles to make obtaining a mortgage happen efficiently.

There are some key players that influence the origination fee:  Loan Advisors, Underwriters, Processors, and Closers. In short…

Loan Advisors answer questions to make sure borrowers are informed about the loan product they invest in and how each step of the process will work. They are also responsible for finding a creative approach to structuring loan options that accomplish long and short-term financial goals.

Underwriters have an important job of ensuring borrowers get a loan that is supported by their income. They work on solutions to meet all of the borrowers’ needs and gain the ‘stamp of approval’.

Processors are one of the borrowers’ greatest assets because they are responsible for identifying the best and most manageable way of obtaining paperwork to get the loan approved.

Closers complete all final verifications to push the loan through. They will verify employment and that no new accounts have been opened that were not previously considered throughout the loan process.

All roles in the process have to work as one cohesive entity to get the loan funded and closed. Time is spent watching out for every borrower and making sure everything is accurate and compliant to complete a quality loan. At the end of the day, lenders work hard to get borrowers approved. They provide support from application to closing. Lenders have to treat each borrower graciously and help as much as possible – If any questions are left unanswered, the job is not done!

All of these facets contribute to the purpose of the origination fee. While seeing this fee included with a loan can be concerning for borrowers at first, it serves an important purpose: to protect both the lender and the borrower. It provides peace of mind that all aspects of the loan are being handled with the utmost care, accuracy, and professionalism.