Origination Fee

• A loan origination fee, also known as an underwriting, administrative or processing fee, can cover many costs. This may include your lender's attorney fees, documentation preparation costs, any applicable notary fees as well as other types of related costs. The loan origination fee is implemented by lenders so they can recover the costs related to legally securing your home, and make a profit beyond the annual interest rate associated with your mortgage.
  
  

Points

• Points are often assessed as part of your loan origination fee. The amount of your loan origination fee is determined by a point system. One point is equal to 1 percent of the total cost of your mortgage. For a $400,000 mortgage, the loan origination fee would be $4,000, if no other fees were added. Your loan origination fee is also determined by current market conditions in the area where the home is located. Homes in or near large cities often have higher-than-average mortgage origination fees.
  
  

Median Cost

• The average loan origination fee can vary depending on the amount of money that the buyer puts as a down payment toward the mortgage. According to the Federal Reserve Board, as of 2010, the median home origination fee for a home with a 5 percent down payment was $2,734. If the buyer put down 10 percent, the median cost was $2,537. Those who are purchasing or refinancing a home should keep in mind that these are averages and may or may not be indicative of the origination fee on their own home.
  
  

Shopping

• Loan origination fees are negotiable, so you should always shop around for the best deal available when applying for a mortgage or mortgage refinancing. Loan origination fees are fully tax-deductible the year they are paid, so long as they were paid in cash toward a mortgage, and do not have a total deduction greater than the average of the area in which the home was purchased. Points paid for refinancing costs must be deducted over the term of the loan. To find out more about loan origination fees and points, you should contact a licensed mortgage lender.