Natalie toggles between news stories and enterprise reporting to bring timely personal finance topics to readers. Her mission is to help inform people of all financial backgrounds about events that may affect their financial futures. Her work has appeared in numerous publications such as CNBC, Bankrate, Buzzfeed, ABC Action News, The Chicago Tribune, The Associated Press and the Tampa Bay Times. She’s appeared on various podcasts and news shows to discuss personal finance topics, including Nasdaq’s Trade Talks.
Having lived in several states, owning primary residences and investment properties, Josh Patoka uses his experience using mortgages and HELOCs to help first-time home buyers and home owners find the best home loan for their financial goals. His work has been featured on several financial and media websites.
Natalie Campisi,
Natalie toggles between news stories and enterprise reporting to bring timely personal finance topics to readers. Her mission is to help inform people of all financial backgrounds about events that may affect their financial futures. Her work has appeared in numerous publications such as CNBC, Bankrate, Buzzfeed, ABC Action News, The Chicago Tribune, The Associated Press and the Tampa Bay Times. She’s appeared on various podcasts and news shows to discuss personal finance topics, including Nasdaq’s Trade Talks.
Josh Patoka
Having lived in several states, owning primary residences and investment properties, Josh Patoka uses his experience using mortgages and HELOCs to help first-time home buyers and home owners find the best home loan for their financial goals. His work has been featured on several financial and media websites.
Chris Jennings is a writer and editor with more than seven years of experience in the personal finance and mortgage space. He enjoys simplifying complex mortgage topics for first-time homebuyers and homeowners alike. His work has been featured in a number of outlets, including Yahoo Finance, MSN, Fox Business, and GOBankingRates.
Reviewed
Chris Jennings
Chris Jennings is a writer and editor with more than seven years of experience in the personal finance and mortgage space. He enjoys simplifying complex mortgage topics for first-time homebuyers and homeowners alike. His work has been featured in a number of outlets, including Yahoo Finance, MSN, Fox Business, and GOBankingRates.
Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.
Most mortgage lenders charge an origination fee, which is usually around 1% of the total cost of the loan. The purpose of the fee is to cover expenses like application processing, underwriting the loan and other administrative services the lender offers.
Although rare, some lenders don’t charge an origination fee. Forbes Advisor compiled a list of lenders who waive this fee on their mortgage products and who also stood out in other ways such as offering low minimum credit score requirements, discounts and other helpful features.
Read more
Show Summary
- Best Mortgage Lenders With No Origination Fee 2024
- Navy Federal Credit Union
- Ally Bank
- Summary: Best Mortgage Lenders With No Origination Fee 2024
- Tips For Comparing No-Origination-Fee Mortgages
- What Is An Origination Fee?
- How Much Are Loan Origination Fees?
- When Do You Pay the Origination Fee?
- Who Is Responsible for Paying the Origination Fee?
- Are Origination Fees Negotiable?
- Origination Fees vs. Points
- How Do Mortgages With No Origination Fee Work?
- Pros and Cons of Mortgages With No Origination Fee
- Should You Get a Mortgage With No Origination Fee?
- Methodology
- Frequently Asked Questions (FAQs)
- Next Up In Mortgages
Best Mortgage Lenders With No Origination Fee 2024
Summary: Best Mortgage Lenders With No Origination Fee 2024
Tips For Comparing No-Origination-Fee Mortgages
Although saving money on origination fees is a benefit for borrowers, make sure you look at other fees and the interest rate to get a full picture of your loan costs. Lenders may pass on the cost of the origination fee to borrowers in other ways, so it’s important to review your APR, which will show you the total cost of the loan.
The best way to get an accurate picture of your loan costs is to get a loan estimate upon application. Because your interest rate depends largely on your credit score and debt-to-income ratio, you would need to provide income and asset information in order to get a loan estimate.
You should shop around for a lender in order to get the best mortgage rate. You can take advantage of multiple loan estimates by negotiating with lenders to see if they will match or undercut the lowest estimate you get, either by lowering the interest rate or reducing certain fees, such as application fees.
What Is An Origination Fee?
Lenders charge an origination fee to facilitate the loan. This is a catch-all term that encompasses many administrative services that the lender provides, including preparing your documents, verifying income and other services required to process your loan application.
How Much Are Loan Origination Fees?
Origination fees are a percentage of the total loan amount. They’re usually between 0.5% to 1%.
When Do You Pay the Origination Fee?
You pay the mortgage origination fee when you close on your mortgage. Closing is the stage when you and your lender sign and finalize all the loan paperwork and money gets transferred. The origination fee can be paid from your loan proceeds, from the sale of your current home (if you’re moving and buying a new home) or from your savings account, typically via wire transfer.
Who Is Responsible for Paying the Origination Fee?
The borrower is usually responsible for paying the mortgage origination fee. It is included as part of the final costs due at closing, or it may be rolled into the cost of borrowing the loan in the form of a higher interest rate.
Are Origination Fees Negotiable?
Origination fees may be negotiable, depending on the lender. If you get competing offers for identical mortgages from multiple lenders, you may be able to use a loan estimate from a lender with lower origination fees to negotiate a better deal with a different lender.
Pro Tip
Points—an optional fee you can pay to lower your interest rate—may also be negotiable. It depends on how badly the lender wants your business.
Certain third-party fees charged by companies other than your lender, such as title and escrow fees, may also be negotiable. At a minimum, shop around for these services to find the most competitive offer.
Appraisal fees and government recording and transfer tax fees aren’t negotiable.
Origination Fees vs. Points
| Origination Fees | Points |
|---|---|
|
Typically required
|
Optional
|
|
Covers the cost of processing your application, underwriting and closing your loan
|
Allow you to pay a lower interest rate each month in exchange for prepaying interest up front
|
|
Not tax deductible
|
May be tax deductible if you itemize your deductions
|
How Do Mortgages With No Origination Fee Work?
A mortgage with no origination fee has lower closing costs as only third-party fees and mortgage insurance or upfront funding fees apply. While your initial out-of-pocket costs are lower, lenders typically charge a higher interest rate instead to recoup processing fees.
Pros and Cons of Mortgages With No Origination Fee
| Pros | Cons |
|---|---|
|
Lower upfront expenses
|
Potentially higher interest rates
|
|
Purchase, refinance and home equity loans qualify
|
Not available for all loan programs or with all lenders
|
|
Can have low down payment requirements
|
Typically higher monthly payments
|
|
Several lenders waive origination fees
|
Third-party fees, mortgage insurance and discount point costs may still apply
|
Should You Get a Mortgage With No Origination Fee?
No origination fee mortgages can be an excellent option when you need more funds to afford a down payment. However, anticipate taking on a higher interest rate and monthly payment as the lender recoups the missing origination fee over the life of the loan.
In lieu of this type of mortgage, consider negotiating with the seller and asking them to cover all or some of the closing costs to avoid a higher rate and reduce your borrowing costs.
Methodology
We reviewed more than a dozen mortgage lenders that do business both online and in person throughout the United States. The lenders we reviewed represent some of the largest mortgage lenders by volume, which include banks, credit unions and online lenders. Of these lenders we chose the ones that did not charge origination fees, while also offering benefits in other areas.
Our scoring methodology included capturing 10 data points, which covered interest rates, lender fees, loan types, discounts, accessibility and borrower requirements. We compared each lender’s advertised mortgage rates to average mortgage interest rates as reported in Freddie Mac’s Primary Mortgage Market Survey. As of the reporting period, this data was accurate. However, be sure to check the latest mortgage rates to get the most accurate data.
The best lenders received a score of four stars or better and represented outstanding performance or services in one or more areas.
The following is the weighting assigned to each category:
- Loan costs: 30%
- Speed: 20%
- Credit requirements: 20%
- Loan types offered: 20%
- Access and availability: 10%
Specific characteristics taken into consideration within each category include average APR, average interest rate, origination fees, minimum credit score requirements, discounts and customer service availability.
We also offered bonus points up to 5% of the score when a lender considers alternative credit data.
To learn more about our rating and review methodology and editorial process, check out our guide on How Forbes Advisor Reviews Mortgage Lenders.
Frequently Asked Questions (FAQs)
Why do some lenders charge origination fees?
A loan origination fee is one way lenders make money in exchange for processing your loan. Even if a lender doesn’t charge an origination fee, they’re making money on your loan in some way so that charge might show up in other fees or in your interest rate.
What is a good loan origination fee?
Loan origination fees vary by lender, so it’s always important to compare multiple lenders to get the best rates and fees. Generally, origination fees are 0.5% to 1% of the total loan amount, though there are some lenders that offer mortgages with no origination fee.
Are closing costs included in the down payment?
Closing costs aren’t included in your down payment. You should expect to pay anywhere between 2% and 5% in closing costs, which include a wide range of fees such as title, inspection, escrow and commission.
What does it mean if a lender has zero lender fees?
If a lender says they have zero lender fees, typically called a no closing cost mortgage, this means that they won’t charge you for common fees associated with buying a home. These fees usually include appraisal, application, underwriting and some third-party closing costs. However, the lender will typically compensate for these costs in other ways, like by charging you a higher interest rate.
What is the average mortgage loan origination fee?
The exact amount will vary depending on the size of the loan, but the average mortgage loan origination fee is between 0.5% to 1%.
How do I calculate loan origination fee?
You can calculate the mortgage origination fee by applying the percentage charged to the loan amount. So, a $400,000 mortgage loan could have a fee ranging from $2,000 (0.5% of $400,000) to $4,000 (1% of $400,000).
