Is this a fair fee to charge for loan origination?

Question

Here's the scenario: A private lender is seeking a mortgage company to handle loan origination for his loans. The private lender has his own list of lendee's, so the ONLY activity the mortgage company handles is the origination.

What's a fair fee to pay for just origination? I've received a quote for 1% + $500.

Bill Gulley · Answer

A private lender? An individual? Only a registered lender can charge loan fees in any state that I've found. Get it in writing and turn them in to your state finance department and find another lender. If it's really a private lender.  :)

Will Barnard · Answer

I agree with Jeff, I am so use to answering these questions from those in OH, IN, etc where property purchase prices are around $50k, that 1% only amounts to $500 bucks. In CA, we have higher price points and I just realized that the OG poster is here in CA. $500-$1000 max fee is in deed the going rate here. Thanks for the clarification Jeff.

Jeff S. · Answer

1% is nonsense.  It’s a “standard” rate brokers like to quote.  Deals can be as different as fingerprints but there’s little difference in origination work and less justification for paying $5000 for a half-million dollar loan than $700 for a $70k deal.  Plus $500?  Crazy.

The easiest way to find a broker is to approach one and say you need some SFR loans originated for a fixed fee.  Tell them what you’ll pay. If they insist they charge 1%, move on. A fair price is between $500 and $1000 per loan here, at least, in California.  The HUD and GFE should state that number exactly.  There should be no other charges or junk fees to the broker.

Jeff

Will Barnard · Answer

1% should be max, I have also seen just a flat fee too.

Angie Menegay · Answer

1% is the typical amount I've seen around here from mortgage brokers. Some banks charge it as well.

Pat L. · Answer

I have seen them as high as $3500, yet the one we deal with to qualify our borrowers charges  $300 & that includes the appraisal.

Is this a fair fee to charge for loan origination?

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