What is the role of the loan origination fee?

The loan origination fee is specifically a charge assessed by the lender for the services involved in processing a new loan application. This fee covers various costs associated with evaluating the borrower's creditworthiness, preparing the necessary documents, and underwriting the loan. It's an upfront cost that often reflects the lender's work in facilitating the transaction from application to closing.

By understanding the loan origination fee, borrowers can better prepare for their total loan costs, as it is typically expressed as a percentage of the total loan amount. This fee is distinct from other costs that might arise during the loan process, such as late payment fees, appraisal costs, or other closing expenses.