As you start working through the process of finding and buying a new home, you are probably going to come across many new terms and topics that are otherwise unfamiliar to you. Some of them will likely be about the purchasing process and your loan details. For example, do you know what a home loan origination fee is?
Home Loan Origination Fee: The Basics
There will be a number of charges, fees, and costs that go into buying your new home. Many of them will be straight-forward, but some can feel confusing. The loan origination fee can be one of them. So, what is a home loan origination fee, do you have to pay it, and what does it cover?
This fee is included with the cost of your loan – but one you often pay at closing – and it covers the processing costs for the bank or loan company that you select. For example, it covers many administrative costs like your loan workup, handling your paperwork processing through underwriting to determine your risk and creditworthiness, credit checks, and verifications.
Why Do I Have to Pay a Loan Origination Fee?
Your mortgage company or bank takes care of handling your loan paperwork and confirming that you are qualified for the loan you want, and as anyone that provides a service, they charge for it. The rates for mortgage loan origination fees often average between 0.5% to 1.0% of the total loan amount you would like.
Can You Negotiate the Origination Fee?
Origination fees can be negotiated somewhat. They will need to be covered somehow, though, so the negotiation is often about when you would like to pay for them. If you would rather roll them into the loan, your interest rate can be higher. And doing so will increase the size of your loan so you will need to pay interest on the origination fee costs as well.
It is a good idea to shop around and discuss these fees when you are looking at buying a home. If a bank advertises no origination fees, you will likely find they work those fees into the loan itself. Some credit unions could offer something with low origination fees, but you will likely need to be a member of the organization.
Keeping your credit in good standing and at a higher rating can deliver lower origination fees because the bank deems you less of a risk.
When you begin to compare loan options and offers from different banks, make sure to evaluate the offers closely and make sure they are in your best interest. If you can take care of the origination fees when you apply for your home mortgage loan, you will likely be better off and actually pay less from the start.
Something else to consider when comparing loans is how long you will live in the home in contrast to the interest you will pay. If you only plan to live there a short time and don’t want to pay the origination fees up front for whatever reason, rolling them into your loan could be a better option. Do your homework to see what is best for you.
Working with an Experienced Memphis Area Real Estate Agent
When it’s time to sell your existing home or buy a great new place, turn to a highly regarded and well-informed local real estate agent. You want someone who you can trust to give you the best advice and know-how for your new home purchase or sale. Check out my other great real estate articles to help you through your home selling and buying experience here in Memphis. Staging homes for sale is also part of my expertise. Please ask me about it when you reach out.
Take a minute to learn more about me. With over 19 years of top-notch service for my clients, I can guide you with your house sale, new home purchase, or buying a great parcel of land. As a top, licensed real estate agent in the Memphis area, showing you the best properties for you and your family is my goal!
Contact me at (901) 828-8919 or drop me a quick note at angie@angiekelley.com and we can speak in person about your plans and options.
