Mortgage Loan Origination Fees in California: A Borrower’s Guide

Many borrowers in California end up paying mortgage loan origination fees when buying or refinancing a home. They are one of the most common fees charged by mortgage lenders in California and nationwide.

But what are loan origination fees, and how much do they cost? This article looks at these and other common questions among home buyers and homeowners.

Mortgage Loan Origination Fees in California

In California, the mortgage loan origination fee is one of several charges home buyers (and refinancing homeowners) encounter during the mortgage application and closing  process. Collectively, these fees are referred to as closing costs — a term you’ve probably heard before.

Banks and lenders charge loan origination fees to cover the expenses relating to the processing of the loan application and other documents. The same is true for many types of businesses within the legal, real estate and finance sectors. Such companies often charge fees to cover their internal processing costs.

In California, the mortgage loan origination fee is usually rolled in with the other closing costs. The borrower pays these costs on closing day, usually in the form of a cashier’s check or wire transfer.

How Much Do These Fees Cost?

Now you know what a mortgage loan origination fee is. It’s a charge commonly used by banks and lenders to cover the costs associated with loan setup and processing.

As for the cost, this can vary based on the amount being borrowed and other factors.

In California, mortgage loan origination fees typically amount to 0.5% – 1% of the loan amount. It can vary based on the type of financing being used and other factors. They can fall outside of that range as well, in some cases. But for most borrowers in California, the origination fee will usually cost somewhere between 0.5% and 1% of the amount being borrowed.

Here’s a breakdown to show what a 0.5% fee would look like on different amounts:

• $300,000 loan = $1,500
• $400,000 loan = $2,000
• $500,000 loan = $2,500
• And so on…

If a lender were to charge a 1% origination fee, instead of 0.5%, you would simply double the numbers shown to the right of the equal sign.

When researching mortgage loans online, you might see something referred to as a “no-origination fee loan.” In that scenario, the lender might agree to waiving this particular fee in exchange for charging the borrower a higher interest rate. So while you might end up paying less up front, in closing costs, you would also pay more interest over the lifetime of the loan.

The important thing is to choose a financing strategy that works best for you, based on your short-term and long-term financial goals.

Related: Typical closing costs in the Bay Area

Who Pays for It, Usually?

Recap: A mortgage loan origination fee is a common charge that covers the lender’s internal costs relating to the setup and processing of a home loan. In California, these fees tend to average between 0.5% to 1% of the amount being borrowed, in most cases.

In a standard real estate transaction (where there is a home buyer and seller involved), it’s usually the buyer who pays the mortgage origination fee. It’s their loan, after all. But in some cases, the seller might agree to pay a portion of the home buyer’s closing costs. This is true in California and for most states. It’s called a “seller concession.”

But this is all very market-dependent. That is, it depends on local real estate market conditions and trends in your area.

In a hot housing market, where sellers have buyers “lining up” to make offers, it’s generally unwise for a buyer to ask for seller contributions toward their closing costs. That could result in your offer being turned down, and the house going to some other buyer.

On the other hand, in a slower market home buyers often ask for such concessions — and sometimes the seller agrees. You’ll want to seek your agent’s advice on this subject, before proceeding forward with it.

There shouldn’t be any surprises, when it comes to California mortgage loan origination fees. Lenders typically disclose these and other charges up front, for transparency. You’ll also receive a standardized document known as the “Loan Estimate,” which has an estimated breakdown of all the closing costs you’ll incur. You’ll receive another finalized document shortly before closing day.

Have Mortgage Questions? We’re Here for You!

Bridgepoint Funding has been meeting the mortgage needs of Californians for nearly 20 years. We are located in the Bay Area but serve the entire state. Please contact us if you have questions about home loan origination fees in California, or if you’d like to receive a mortgage quote and cost breakdown. We look forward to hearing from you!