Origination

Definition of 'Origination'


The process of creating a home loan or mortgage. During the origination process, a borrower submits a variety of financial information - tax returns, prior paychecks, credit card info, bank balances, etc. - to the mortgage lender, who uses it to determine the type of loan the borrower is eligible for and what interest rate he or she will pay. The lender will also rely on the borrower's credit report and other information to determine loan eligibility.

Investopedia explains 'Origination'


Everyone must go through the origination process when obtaining a real estate loan, although the type of loan can vary greatly. The three most common loan types are fixed-rate, adjustable-rate and hybrid.

Fixed-rate loans carry the same interest rate for the life of the loan, adjustable-rate mortgages (ARMs) offer a rate that changes in conjunction with an index (like Treasury securities), while hybrid loans have features of both (typically they start as fixed-rate loans and convert to ARMs). In addition, some borrowers may qualify for a government loan, such as those offered by the Federal Housing Authority (FHA) and/or the Department of Veterans Affairs (VA).

These non-conventional loans are designed to make it easier for qualifying individuals to buy homes and typically feature lower qualifying ratios, as well as a lower or no down payment.


Filed Under:

comments powered by Disqus
Hot Definitions
  1. XW

    A symbol used to signify that a security is trading ex-warrant. XW is one of many alphabetic qualifiers that act as a shorthand to tell investors key information about a specific security in a stock quote. These qualifiers should not be confused with ticker symbols, some of which, like qualifiers, are just one or two letters.
  2. Quanto Swap

    A swap with varying combinations of interest rate, currency and equity swap features, where payments are based on the movement of two different countries' interest rates. This is also referred to as a differential or "diff" swap.
  3. Genuine Progress Indicator - GPI

    A metric used to measure the economic growth of a country. It is often considered as a replacement to the more well known gross domestic product (GDP) economic indicator. The GPI indicator takes everything the GDP uses into account, but also adds other figures that represent the cost of the negative effects related to economic activity (such as the cost of crime, cost of ozone depletion and cost of resource depletion, among others).
  4. Accelerated Share Repurchase - ASR

    A specific method by which corporations can repurchase outstanding shares of their stock. The accelerated share repurchase (ASR) is usually accomplished by the corporation purchasing shares of its stock from an investment bank. The investment bank borrows the shares from clients or share lenders and sells them to the company.
  5. Microeconomic Pricing Model

    A model of the way prices are set within a market for a given good. According to this model, prices are set based on the balance of supply and demand in the market. In general, profit incentives are said to resemble an "invisible hand" that guides competing participants to an equilibrium price. The demand curve in this model is determined by consumers attempting to maximize their utility, given their budget.
  6. Centralized Market

    A financial market structure that consists of having all orders routed to one central exchange with no other competing market. The quoted prices of the various securities listed on the exchange represent the only price that is available to investors seeking to buy or sell the specific asset.
Trading Center