If you're beginning the homebuying process, you're probably saving up for a down payment and maybe even closing costs.
But your mortgage provider will likely also charge you lender fees, which pay to process your application and secure your loan.
These charges typically include an applicationfee, originationfee and underwritingfee, but may involve other costs depending on the provider.
What are mortgage lender fees?
"Lender fees" is an umbrella term that refers to the various charges associated with processing, approving and funding your loan.
While these kinds of fees typically include an application fee, origination fee, processing fee and underwriting fee, the full list of what counts as lender fees will vary depending on the financial institution you're getting your loan from.
Lender fees are typically paid by the borrower, although you may be able to negotiate with the seller to pay a portion of them. Your lender may also be willing to reduce or even waive these charges, typically in return for a slightly higher interest rate.
How much are lender fees?
Lender fees average between 1% and 2% of the loan amount. That might not sound like a lot, especially compared to the down payment, but these fees can still be significant when you're buying a home on a tighter budget.
Ally Bank, one of our top mortgage lenders, doesn't charge lender fees, though you may still have to pay an appraisal fee and recording fee and you may be charged for title search and insurance.
Ally Home
Annual Percentage Rate (APR)
Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included
Types of loans
Conventional, jumbo, HomeReady
Terms
15 – 30 years
Credit needed
620
Minimum down payment
5% for conventional loan, 3% for HomeReady loan
Terms apply.
Read our Ally Bank mortgage review
Pros
- No lender fees
- Preapproval in as little as three minutes
- Available in all 50 states
- HomeReady loan only requires a 3% down payment
Cons
- No FHA, USDA or VA loans
- No home equity lines of credit (HELOC)
- No physical branches
Better is another online mortgage provider that doesn't charge lender fees. Borrowers can get approved for a conventional loan with as little as 3% down and Better offers a $5,000 closing cost grant to qualified homebuyers.
Better Mortgage
Annual Percentage Rate (APR)
Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included
Types of loans
Conventional loan, FHA loan, Jumbo loan and adjustable-rate mortgage (ARM)
Terms
10–30 years
Credit needed
620
Minimum down payment
3.5% if moving forward with an FHA loan
Terms apply.
FAQs
How much are lender fees?
Lender fees can range from 1% to 2% of your total loan amount, depending on the lender.
What is included in lender fees?
Lender fees include various charges associated with processing and funding your mortgage. They may include an origination fee, application fee and underwriting fee. In some cases, underwriting fees are a flat rate, but they're most often between 0.5% and 1% of your loan amount.
Do all mortgage companies charge lender fees?
Who pays lender fees?
Lender fees are typically paid by the borrower, although you may be able to negotiate with the seller to pay some of them. You may also try to work with your lender to reduce or even waive the fees, typically in return for a slightly higher interest rate.
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AtCNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every mortgage review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of home loan products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics. Seeour methodologyfor more information on how we choose the best small down payment mortgages.
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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
