What Is a Mortgage Loan Origination Fee?

Identification

A mortgage loan origination fee can sometimes be difficult to distinguish as different lenders may use a variety of identifying terms. If you do not see this specific term on your list of closing costs, look for a fee with a title such as underwriting, administrative or processing. If you still do not see the criteria, look for the term "points." The only time you may not see this fee as a separate item is if your lender bundles all closing costs into one charge, a fee the Federal Reserve Board calls "all-in-one" pricing.

No matter what the identifying term, a mortgage loan origination fee represents evaluation and administrative costs relating to your loan. Common costs include attorney's fees, notary public fees and document preparation costs. Rather than calculating a total charge based on actual cost, most lenders charge a percentage of the total loan amount. According to the FRB, mortgage loan origination fees average $2,734 with a 5 percent down payment and $2,537 with a 10 percent down payment, as of 2011.

When it comes time to file your income tax return, it may be confusing if your lender uses the term "points" to designate a mortgage loan origination fee. Although, as of 2010, the Internal Revenue Service normally allows you to deduct the full dollar amount of points in the year in which you pay them, this does not apply to points you pay that include any type of closing costs. If points include charges that usually occupy a separate category on your settlement statement, such as those that make up a mortgage loan origination fee, you cannot deduct those points.

It is vital that you understand charges in your mortgage loan origination fee, as well as the remainder of closing costs. To assist you, a number of rules and regulations require your lender to give you an itemized list of closing costs. The catch is that you must first ask for these documents within a specified time frame. The Real Estate Settlement Procedures Act states your lender must provide a good faith estimate of what your closing costs will be within three days of submitting your loan application. In addition, the RESPA states your lender must also give you a copy of your HUD-1 Settlement Statement on the day before closing. Finally, the Truth in Lending Act states your lender must provide an estimate of loan costs, including your interest rate and total finance charge within three days after he receives your loan application.