How To Avoid Loan Origination Fees
Origination fee is nothing but the amount levied for loan generation and for loan disbursement the huge money amounts that are pooled in. Loan originator is the designation provided to the financial institution or the bank from where the loan originates. Loans offered by these financial institutions are in the initial stages just money in huge sums or pools in a particular account which later on are forwarded or sold off to brokers or lenders who conduct the lending job. It is the originator of the loan who levies the origination fee.
As opposed to loans that are smaller the loans that are large like the mortgage loans and the home loans which have principal figures that are quite big have the origination fees. Higher loans like loans which are secured well to property, home equity lines of credit, loans provided for construction and home equity loans have origination fees that are larger which are fees charged for covering costs like underwriting costs for approval, processing, loan handing over to the lender-broker, for covering the loans actual origination costs and other costs related to compliance of FHA or Federal Housing Administration and HUD Department of Housing and Urban Development.
Both of these maintain guidelines, rules and regulations which help define nature and limits of closing costs. Of the threshold of 1% the origination fees could not exceed of the principal amount of the loan till January 2010. It is a flat rate basically and it hardly matters if the loan is a large or a small one and is levied. However this fee can be avoided in certain cases which are a long shot completely. In the usual process an application for the loan is filed, the originator processes and underwrites the loan, and makes a decision on the credibility of the loan. An applicant has no role to play in this position and may only need to provide support documents if asked.
On approval the borrower is sent the quotation for consent upon which the loan is originated by the originator, money is pooled and forwarded to the lender for disbursement. To get a loan without origination fee is difficult as the process is costly. To avoid origination fee consider loans which get approved without costs of closing. This is possible if you are an MIT graduate with a job that pays highly. Property having good value and great market value project also needs to be purchased. Through rates of interest the costs of closing would be recovered so there is no need for you to pay origination fees for the loan.
The broker bears the closing costs in long term loans which you can consider to avoid origination fee. At times in lieu of the origination fee other costs are charged by the lender in which case the fees get reverted to preparation of documents, verification of deposits which are actual categories which by negotiating with the lender or broker can be done. The interest can be lowered by negotiating with the lender and increasing discount points. However for earning discount points a lot has to be paid in the form of interest payment in advance.