A loan origination fee is an add-on fee charged by the lending broker to the borrower for evaluating, preparing and submitting a proposed mortgage loan. The loan origination fee is used to pay for the broker’s expertise in finding which lender will fund the loan and document preparation assistance. Part of the fee may go towards marketing, administrative and overhead expenses. Another portion of the fee covers other initial expenses, such as the credit report, submitting a title search and offsetting the cost of the appraisal. The loan origination fee varies from less than 1 percent to as much as 2 percent of the entire value of the loan. Sometimes a broker may just charge a flat fee, and in some cases the fee may be waived as a condition of the loan.
