What is defined as an “Origination Fee”?

An "Origination Fee" is specifically defined as a fee charged by the lender to process a new loan application. This fee compensates the lender for the work involved in evaluating and approving the loan, which often includes administrative tasks, underwriting, and other associated activities that facilitate the loan process.

It is important to understand that this fee is typically calculated as a percentage of the loan amount and is distinct from other costs associated with the loan. Unlike appraisal fees, which are directly related to property valuation, or closing costs, which cover various expenses incurred during the closing of the loan, the origination fee is focused solely on the initial processing and approval of the loan itself. Similarly, credit report checks are fees for assessing the borrower's creditworthiness and do not fall under the origination fee categorization. All these nuances differentiate the origination fee from other related costs throughout the loan lifecycle.