What is the name for the fee that is calculated as a percentage of the loan amount charged by the lender to cover the costs of making the loan?

The fee calculated as a percentage of the loan amount charged by the lender to cover the costs associated with processing and underwriting the mortgage is known as the origination fee. This fee is essential because it compensates the lender for the expenses incurred in creating the loan, which can include administrative processing, underwriting, and other related costs.

Typically, the origination fee is expressed as a percentage of the loan amount, usually ranging from 0.5% to 1%. This fee can significantly impact the overall cost of obtaining the mortgage, which is why borrowers should consider it when comparing loan offers. Understanding the nature of this fee helps borrowers make informed decisions regarding their loan options.