Origination Fee

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Definition of 'Origination Fee'

An origination fee is a charge that lenders often charge to borrowers when they originate a loan. The fee is typically a percentage of the loan amount and is paid at the time the loan is closed. Origination fees can vary depending on the lender, the type of loan, and the borrower's credit score.

There are a few reasons why lenders charge origination fees. First, the fee helps to cover the costs of originating the loan, such as the lender's staff time, legal fees, and other expenses. Second, the fee can help to compensate the lender for the risk of lending money to the borrower. Third, the fee can help to ensure that the borrower is serious about taking out the loan.

Origination fees can be a significant cost for borrowers, so it is important to compare origination fees from different lenders before choosing a loan. Borrowers should also be aware that origination fees are not tax-deductible.

In addition to origination fees, lenders may also charge other fees, such as application fees, processing fees, and underwriting fees. It is important to be aware of all of the fees associated with a loan before you sign the paperwork.

Here are some tips for borrowers who are considering an origination fee:

* Shop around for the best rate and terms.
* Compare origination fees from different lenders.
* Be aware of all of the fees associated with a loan.
* Make sure you can afford the monthly payments.

If you have questions about origination fees or any other loan-related fees, be sure to ask your lender.

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