A $0 origination fee saves you the full amount another lender would otherwise charge, typically 0.5% to 1% of your loan amount. On a $400,000 loan, that can be $2,000 to $4,000 kept out of your closing costs entirely, since a $0 origination fee is not a discount, it is the absence of the fee.
Quick Answer:
- Industry-standard origination fees run 0.5% to 1% of the loan amount, listed as “Origination Charges” in Section A of the Loan Estimate.
- On a $400,000 loan, a 1% origination fee costs $4,000; a $0 origination fee saves that full amount.
- Tomo Mortgage charges $0 in Section A lender fees on conventional, FHA, VA, and jumbo loans.
- A lender with a slightly higher rate but $0 origination fees can still cost less over the life of the loan than one charging 1% upfront with a slightly lower rate.
- Other closing costs, appraisal, title insurance, and government recording fees, are separate from origination fees and apply regardless of which lender you choose.
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Get Started →What an Origination Fee Actually Covers
An origination fee compensates the lender for processing and underwriting your loan. It is controlled entirely by the lender, unlike third-party costs such as appraisal fees, title insurance, and government recording fees, which apply regardless of which lender you choose and are not part of the origination charge.
Dollar Savings by Loan Size
At a 1% origination fee, a $0-fee lender saves you the following at each loan size:
| Loan Amount | Origination Fee at 1% | Savings at $0 Origination |
|---|---|---|
| $200,000 | $2,000 | $2,000 |
| $300,000 | $3,000 | $3,000 |
| $400,000 | $4,000 | $4,000 |
| $600,000 | $6,000 | $6,000 |
| $800,000 | $8,000 | $8,000 |
*These figures are illustrative examples and scale directly with loan size, since origination fees are calculated as a percentage of the loan amount, not a flat dollar figure.
Rate vs. Fee: Which Actually Costs More?
A $4,000 fee on a $400,000, 30-year loan works out to roughly 0.07% in rate terms, a small but real difference once spread across the life of the loan. This means a lender advertising a rate around 0.10% higher than a competitor’s, but with $0 origination fees, can still cost the same or less overall than a lender with a slightly lower rate that charges 1% upfront. Comparing rate alone, without accounting for Section A fees, is one of the most common ways borrowers overpay without realizing it.
How to Verify Origination Fees on Any Lender’s Loan Estimate
Every lender is required to provide a standardized Loan Estimate. Section A lists all lender origination charges. If Section A is blank or shows $0, the lender is not charging an origination fee. If it shows a dollar amount or percentage, compare that figure directly against other lenders’ Loan Estimates rather than comparing rates alone.
Frequently Asked Questions (FAQs)
What is a mortgage origination fee and who charges it?
It is a fee the lender charges for processing and underwriting your loan, typically 0.5% to 1% of the loan amount. It is set entirely by the lender, not a third party.
What does Section A on a Loan Estimate include?
Section A lists the lender’s own origination charges. If it is blank or shows $0, the lender charges no origination fee.
Do lenders with $0 origination fees charge higher rates to compensate?
Not necessarily. It depends on the specific lender. Compare both the rate and Section A fees together, since a slightly higher rate with $0 origination fees can still cost less overall than a lower rate with a 1% fee.
How much can I save by choosing a $0 origination fee lender?
The exact industry-standard fee you would otherwise pay, 0.5% to 1% of your loan amount. On a $400,000 loan, that is $2,000 to $4,000.
Ready to experience a different kind of lender?
Tomo was built without lender fees, which means our team’s success is measured by your closing. If you value transparent pricing and a stremlined digital experience, Tomo Mortgage was built for you.
Get Started →