When shopping for a mortgage, you’ll find that many mortgage lenders charge an origination fee, which is the cost of processing and underwriting the loan. You will also find that some lenders do not have these fees at all, or may reduce or waive them for some clients. Here’s Bankrate’s guide to the best no-setup fee mortgage lenders in 2021.
To determine the best mortgage lenders with no origination fees, Bankrate evaluated lenders based on several criteria, including affordability (APR, credits and fees); borrower’s experience (eg online pre-approval); and the extent of loan offerings.
Best mortgage lenders with no set-up fees
Better.com is one of Bankrate’s top mortgage lenders and top lenders online. The lender doesn’t charge any fees and has a fast application and approval process, in part because it’s only online. Plus, the lender’s best price guarantee gives you $ 100 if it can’t match a lower rate you receive from a competitor.
PenFed Credit Union
Although you must be a member to take out a mortgage with PenFed Credit Union, the credit union does not charge any fees on home loans and can credit you based on your loan amount: $ 500 if less than $ 200,000; $ 1,000 if between $ 200,000 and $ 699,999; and $ 2,500 if $ 700,000 or more. Ideally, you can start the application process online or over the phone, or apply in person at a branch (if you are in your area). However, this lender only offers conventional, jumbo, VA and Home Equity Lines of Credit (HELOC) loans.
Like Better.com, Reali Loans uses technology to help you complete the majority of the online mortgage application process, and charges no lender fees or hidden fees. While you can get prequalified and lock in your rate instantly through the lender’s website, you cannot apply for a conventional loan, and the lender is available in only 11 states (Arizona, California, Colorado, Georgia, Illinois, Michigan, Oregon , Pennsylvania, Texas, Virginia and Washington). Reali Loans is affiliated with Reali, which offers cash offers or exchange solutions for sellers as well as homes for buyers, giving you the option of an end-to-end real estate experience.
What is an origination fee?
Origination fees are an upfront fee that a lender charges to cover the costs of initiating and processing a loan. These one-time fees compensate the lender for services such as collecting information about the borrower to process and fund the loan, and in the case of a mortgage, managing the escrow.
Some lenders include the cost of underwriting – the risk assessment the lender performs for each borrower – in the origination fee, while others charge a separate processing or underwriting fee.
Origination fees exist for many types of loans, including mortgages and personal loans.
How much are the origination fees?
Mortgage origination fees are based on a percentage of your home loan, and typically you’ll pay between 0.5% and 1%. So if you were to take out a loan of $ 350,000, the origination fee could cost you $ 1,750 to $ 3,500.
These fees are part of your closing costs, which are all costs associated with the mortgage, including appraisal, credit check, and other fees. In total, closing costs are typically up to 2% to 5% of your loan.
You can find your specific mortgage origination fee on the loan estimate, the three-page document that was given to you by your lender when you applied for the loan.
Are origination fees negotiable?
You may be able to negotiate the origination fee by simply asking the lender to reduce the cost or forgo it, especially if you are a strong borrower with good credit. It can also be an option if you get a loan from a bank or credit union you already have a relationship with.
Another way to avoid paying the original fees is to have the door-to-door seller cover them – although this tactic typically only works in a buyer’s market, when sellers have fewer offers to choose from, or if the seller needs to act quickly or has had trouble unloading the property.
Some lenders also offer mortgages with no closing costs, which include the cost of origination fees in the loan itself. This can be a good way to go if you don’t have a lot of cash available for closing costs up front, but know that you will be paying more for your loan overall.