Is the Origination Fee Negotiable on a Home Loan?
The origination fee on a mortgage, or home loan, is usually 1 percent of the mortgage as a whole. It is part of the fee paid to the loan officer for closing the loan and it is almost always negotiable.
Other People Are Reading
-
Significance
-
At 1 percent or more of the value of the mortgage as a whole, the origination fee can add up to several thousand dollars on a large value loan. This can add to the borrower's closing costs significantly and make the deal cost prohibitive in certain situations.
Function
-
The origination fee, along with any fees associated with the rate charged on the loan, is part of the compensation for the lender and the loan officer themselves. The higher the fees, the more they get paid and vice versa.
-
Time Frame
-
The negotiation on the origination fee begins at the start of the loan process. The lender gives each borrower a Good Faith Estimate outlining the fees associated with the loan. The borrower should analyze this document and discuss any rate or fee reduction at this time.
Considerations
-
When comparing two loans, a borrower should compare the APR (annual percentage rate) as opposed to merely the monthly interest rate. The APR adds in the origination fee and other closing costs to help the borrower find the cheapest overall loan.
Misconceptions
-
It is important to note, however, that if a lender removes or lowers the origination fee on the loan that the cost is more than likely going to be recouped in another fashion. Remember that no one works for free. Analyze the Good Faith Estimate after negotiation to make sure that the fee was not simply moved to another line item.
-
References
- Photo Credit Image by Flickr.com, courtesy of woodley wonderworks
