What is the "loan origination fee"?

The loan origination fee is specifically charged by a lender for processing a new loan application. This fee covers various expenses that the lender incurs throughout the loan origination process, such as underwriting, administrative costs, and sometimes even credit checks.

When a borrower submits a loan application, the lender must evaluate the applicant's financial profile, analyze the creditworthiness, and perform necessary due diligence. The loan origination fee compensates the lender for these services and helps facilitate the connection between the borrower and the financing needed.

Understanding this concept is crucial for borrowers as it represents one of the initial costs they will face when taking out a loan, separate from other fees such as appraisal or closing costs.