2 Best Mortgage Lenders No Origination Fee in 2024
Best Mortgage Lenders No Origination Fee: Most mortgage lenders charge an origination fee, which is usually around 1% of the total cost of the loan. The purpose of the fee is to cover expenses such as application processing, loan evaluation, and other administrative services offered by the lender.
Although uncommon, some lenders do not charge an origination fee. Guide KeynoteUSA compiled a list of lenders that don’t charge this fee on their mortgage products and that also excel in other ways, such as offering low minimum credit score requirements, discounts, and other helpful features.
01. Navy Federal Credit Union – Mortgage Lenders
Best Mortgage Lender for Military Members and Veterans
# Rating: 5.0
# Minimum Credit Score: Does not disclose it publicly
# Mortgage Rates: Below the national average
# Minimum Down Payment: 0%
Compare Rates: Compare rates from participating lenders in your area through Bankrate.com
Editor’s Opinion: Navy Federal Credit Union Mortgage is our top pick due to its waiver of the typical 1% origination fee, opting instead to add 0.25% to the mortgage rate. This might raise long-term borrowing costs but eliminates upfront lender fees at closing.
Pros:
# Loans without a down payment
# Extensive purchase, refinance, and home equity options
# $1000 Rate Match Guarantee
# Access to local and online branches
Cons:
# Strict membership rules
# FHA and USDA mortgage loans are not accepted
Lender Details:
# How to Apply: Apply online, by phone, through a mobile app, or in a branch. Navy Federal home loans are available in all 50 states and Washington, DC. Customer support is available 24/7 by phone in the US.
# Speed: The average closing time for a purchase mortgage is 30 days.
# Eligibility: Minimum credit score requirements are not publicly disclosed. The minimum down payment is 0% for Choice loans and VA loans, 5% for conventional loans (including fixed-rate jumbo loans), and 10% for certain ARMs. Adjustable-rate mortgages have no down payment requirements if used to purchase a primary residence.
# Types of Loans: In addition to VA and conventional loans, eligible borrowers can access exclusive Choice loan products (Homebuyers Choice and Military Choice) offering up to 100% PMI-free financing.
| Loan Type | Available |
|---|---|
| Conventional | ✓ |
| FHA | ✗ |
| Virginia | ✓ |
| USDA | ✗ |
| Jumbo | ✓ |
| ARM | ✓ |
| Home Equity Loan | ✓ |
| Specialty | ✓ – Military’s Choice, Home Buyers’ Choice |
Also Read: The All Best Mortgage Lenders
02. Ally Bank – Mortgage Lenders
Best Mortgage Lender for Fast Pre-Approval
# Rating: 4.0
# Minimum Credit Score: 620
# Mortgage Rates: Higher than the national average
# Minimum Down Payment: 3% to 10%
Compare Rates: Compare rates from participating lenders in your area through Bankrate.com
Editor’s Opinion: Ally Bank Mortgage stands out for its swift pre-approval process, which can be completed online in just a few minutes. Pre-approval letters are customizable and can be sent directly to sellers.
Pros:
# 100% online application process
# Low Down Payment Options
# Fast pre-approval and underwriting times
# Telephone support available Monday to Saturday
Cons:
# FHA, VA, and USDA loans are not accepted
# No home equity loans, HELOCs, or special loan options
Lender Details:
# How to Apply: The application process is entirely online. Customers must use telephone correspondence for customer service. Support is available Monday through Friday, 9 a.m. to 9 p.m. ET, and Saturdays from 10 a.m. to 6 p.m. ET. Pre-approval takes about three minutes.
# Speed: Average closing time is 36 days.
# Eligibility: Minimum credit score of 620. Minimum down payment of 3% for some conventional programs and 10% for jumbo loans. Alternative credit information, such as rent and utility payments, is accepted.
# Types of Loans: Ally offers conventional and jumbo fixed and adjustable-rate mortgages and HomeReady loans. It does not provide government-backed loans like FHA, VA, or USDA.
| Loan Type | Available |
|---|---|
| Conventional | ✓ |
| FHA | ✗ |
| Virginia | ✓ |
| USDA | ✗ |
| Jumbo | ✓ |
| ARM | ✓ |
| Home Equity Loan | ✗ |
| Specialty | ✓ – HomeReady Loans |
Tips for Comparing Mortgages Without Origination Fees
While skipping origination fees can save you money upfront, it’s crucial to assess the overall cost of the mortgage. Here’s how to ensure you’re getting the best deal:
- Evaluate the APR: The Annual Percentage Rate (APR) reflects the total cost of the loan, including interest and fees. Even if a lender waives the origination fee, they might compensate with a higher APR. Compare APRs from different lenders to get a clear picture of your loan’s total cost.
- Get a Loan Estimate: When applying for a mortgage, request a loan estimate. This document provides a detailed breakdown of the loan terms, including interest rate, monthly payments, and all associated costs. This helps you compare different offers effectively.
- Compare Lenders: Look at offers from multiple lenders to find the best rate. Consider negotiating with lenders using the estimates you receive. They might offer to match or beat the lowest estimate to win your business.
- Check for Additional Fees: Even without an origination fee, there could be other costs involved. Ensure you review all third-party fees, such as appraisal and title fees, as well as any potential mortgage insurance or financing fees.
- Consider Your Credit Score: Your interest rate is influenced by your credit score and debt-to-income ratio. A higher credit score often means better rates, so make sure to provide accurate financial information to get the most precise estimate.
What Is an Origination Fee?
An origination fee is charged by lenders to cover the cost of processing your loan application. It encompasses various administrative tasks, including document preparation and income verification.
How Much Are Loan Origination Fees?
Origination fees typically range from 0.5% to 1% of the total loan amount.
When Is the Origination Fee Paid?
The origination fee is paid at closing, which is when you finalize the loan documents and the funds are transferred. It can be paid using loan funds, proceeds from the sale of your current home, or personal savings, often via wire transfer.
Who Is Responsible for Paying the Origination Fee?
The borrower usually pays the origination fee. It is included in the final costs due at closing or may be reflected in a higher interest rate.
Are Origination Fees Negotiable?
Yes, origination fees may be negotiable, depending on the lender. Use competitive offers from other lenders as leverage to negotiate lower fees.
Pro Tip: Points, which are optional fees to lower your interest rate, may also be negotiable. You can also negotiate third-party fees, such as title and escrow fees, but appraisal fees and government taxes are generally non-negotiable.
Origination Fees vs. Points
| Aspect | Origination Fees | Points |
|---|---|---|
| Nature | Generally required | Optional |
| Purpose | Covers loan processing, underwriting, and closing | Lowers interest rate in exchange for paying upfront |
| Tax Deductibility | Not tax deductible | May be tax deductible if itemized |
How Do Mortgages Work Without an Origination Fee?
Mortgages with no origination fee have lower initial closing costs, covering only third-party fees and potentially mortgage insurance or upfront financing fees. However, lenders typically offset the waived fee with a higher interest rate.
Pros and Cons of Mortgages Without Origination Fees
Advantages:
# Lower initial expenses
# Applicable to purchase, refinancing, and home equity loans
# May have low down payment requirements
Disadvantages:
# Potentially higher interest rates
# Not available for all loan programs or with all lenders
# Generally higher monthly payments
Should You Get a Mortgage with No Origination Fee?
A no-origination fee mortgage can be beneficial if you need extra funds for a down payment. However, be aware of the higher interest rates and monthly payments. Consider negotiating with the seller to cover some or all closing costs to avoid higher rates and reduce borrowing costs.
