Definition: Origination Fee
An origination fee is one of the many fees that a person borrowing money to buy a house usually winds up paying. This fee can be used in any way that the lender wants to use it, but the "understanding" is that it is a fee paid to the lender to deal with all of the paperwork involved in setting up the loan.

Oftentimes, a buyer is not dealing with the company that has lots of money to lend out, but rather a "broker" who merely makes all of the arrangements with the borrower and does all of the paperwork, and then passes the loan onto some other company. In a case such as this the origination fee would normally be out of the hands of the actual lender, and is decided upon by the broker.

Since a real lender has to do much of the same work if they are the originator of the loan (in a case where there is no loan broker), they may choose to add on some sort of a fee for this work, just like the broker did. In most cases though, it will be a smaller origination fee if you are going directly to a real lender like a bank or savings and loan or credit union.
go to main site