What Is Included in Lender Fees (Origination Fees)?

Lender fees, also called origination charges, are what you pay the lender to make your mortgage. They are grouped in Section A on page 2 of your Loan Estimate, the standard cost form lenders give you after you apply for most mortgages: discount points, which buy a lower interest rate, plus flat charges such as application, origination, underwriting, and processing fees. Federal rules bar these charges from rising at closing unless a permitted change occurs, such as a change you request or a rate you had not yet locked. Appraisal, credit report, and title charges go to other companies and are listed in Sections B and C instead.

What does Section A include?

The Consumer Financial Protection Bureau (CFPB), the federal agency that writes the Loan Estimate rules, names application, origination, underwriting, processing, verification, and rate-lock fees as common origination charges. A 2024 Federal Reserve Bank of Philadelphia study says these fees help pay for the lender's loan officers, processors, underwriters, support staff, and overhead.

The CFPB notes that origination charges "may be more or less itemized" depending on the lender, so one lender may show a single origination fee where another lists four. Compare the Section A subtotal, not the line labels. If a broker is paid by the lender rather than by you, who pays the mortgage broker explains how that pay shows up in your rate and costs.

Three costs are often mistaken for lender fees:

• Section B, "Services You Cannot Shop For": services the lender requires and chooses, typically including the appraisal, credit report, and flood zone check.
• Government program fees: for FHA, VA, and USDA loans, the upfront mortgage insurance premium or funding fee also appears in Section B. The CFPB notes these are usually set by the program, not the lender.
• Section C, "Services You Can Shop For": services such as title work, where you can pick your own provider.

How much do lenders typically charge?

Lender fees other than points averaged more than $1,000 per home purchase loan from 2018 through 2023, according to the Philadelphia Fed study of closing-cost data that lenders report under the Home Mortgage Disclosure Act (HMDA). The study covered 30-year fixed-rate conventional and FHA purchase loans on owner-occupied single-family homes.

Points have grown faster than other fees as rates rose. The same study found that points plus lender fees paid by buyers, after subtracting lender credits, averaged nearly $3,500 in 2023, up from just under $1,500 in 2021. CFPB data show that 56.6% of first mortgages used to buy single-family primary homes in 2023 included discount points, and the median paid on those loans was about $3,000. HMDA's points figure includes points paid by sellers or other parties, so buyers did not pay all of that themselves. These are 2023 figures, the latest year both reports cover; your own charges depend on the lender, the loan, and whether you choose to buy points.

Can lender fees go up before closing?

Only for specific reasons. Fees paid to the lender, a mortgage broker, or an affiliate of either (a company that shares ownership with it) fall under the strictest federal limit, often called zero tolerance because no increase is allowed: what you pay at closing cannot exceed the Loan Estimate amount. That covers every Section A charge. A lender can raise a charge only when one of the reasons below actually causes that charge to go up, and only if it sends you a revised Loan Estimate or Closing Disclosure within three business days of learning about the reason. A lower appraisal, for example, cannot justify raising an unrelated fee such as the processing fee.

1. A changed circumstance. The CFPB's examples include an appraisal that comes in higher or lower than expected, a new loan or missed payment that changes your credit, and overtime, bonus, or other income the lender cannot document.
2. A change you ask for, such as a different loan type or down payment.
3. A rate you had not locked. If your rate was not locked when you got the Loan Estimate, the points and lender credits can change when you lock. The lender must send a revised Loan Estimate within three business days after the lock.
4. A late decision. If you tell the lender you want to proceed more than 10 business days after it provided the Loan Estimate, or after a longer deadline it set, it can issue new estimates.

If a lender collects more than these rules allow, it must refund the excess within 60 days after closing. Before you receive the Loan Estimate and say you intend to proceed, the lender may charge only a reasonable fee for pulling your credit report.

How do you trade fees for a different rate?

Lender credits work the opposite way from points: you accept a higher rate, and the lender pays part of your closing costs, shown as a negative number in Section J. The CFPB says how much a point lowers the rate depends on the lender, the loan type, and the market. In 2023 HMDA data, each point was associated with a rate about 0.23 percentage point lower for similar borrowers at the same lender, the Philadelphia Fed study found.

Here is a hypothetical quote from one lender on a $350,000, 30-year fixed-rate loan, with every other fee the same:

The 5-year cost is the interest paid over the first 60 payments, plus the point or minus the credit. The point option costs less than the no-point option once you have made 48 payments, because by then the lower rate has saved more than $3,500 in interest. Before the 48th payment, the credit option costs the least, so it fits if you expect to sell or refinance within four years; the point fits if you expect to keep the loan longer. This comparison ignores taxes and what the $3,500 could earn if you kept it.

You can run the same test with real offers. On page 3 of each Loan Estimate, the "In 5 Years" line shows what you will have paid in principal, interest, mortgage insurance, and loan costs, and how much principal you will have paid off. The CFPB says to subtract the second number from the first to get your five-year cost. That total includes points but not lender credits, so subtract any Section J credit yourself. The APR (annual percentage rate) on the same page reflects the interest rate, points, broker fees, and other charges you pay to get the loan, but it spreads them over the full loan term. If you expect to move or refinance sooner, the five-year figure is the better guide. How APR differs from the interest rate covers what each number includes.

How can you lower your lender fees?

1. Compare Loan Estimates from several lenders for the same loan. Ask each lender to quote the same loan amount, loan type, and number of points. Then compare the Section A and Section B subtotals, which the CFPB says vary by lender, along with any lender credits.
2. Ask your preferred lender to match a better offer. The CFPB says lenders are often willing to match or beat a competitor's offer.
3. Skip points you will not use. The CFPB says points can make sense if you plan to keep the loan for a long time, and may not if you are unsure how long you will keep it.
4. Ask about broker pay up front. The lender can cut its own price to match a competitor, but under the CFPB's official interpretation of the federal rules on loan officer and broker pay, a mortgage broker generally cannot reduce its compensation on your loan for that reason, even when you pay the broker directly.

Which closing costs are negotiable covers the rest of your closing statement, and when to lock your rate explains how lock timing affects points and credits. For choosing among lenders on more than price, see how to choose the best lender for your mortgage.