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.

BREAKING DOWN '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.

  1. Real Estate

    Land plus anything on it, including buildings and natural resources.
  2. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  3. Origination Points

    A type of fee borrowers pay to lenders or loan officers in order ...
  4. Mortgage-Backed Security (MBS)

    A type of asset-backed security that is secured by a mortgage ...
  5. Assumable Mortgage

    A type of financing arrangement in which the outstanding mortgage ...
  6. Mortgage Broker

    An intermediary who brings mortgage borrowers and mortgage lenders ...
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  1. Can FHA loans be used for investment property?

    Federal Housing Administration (FHA) loans were created to promote homeownership. These loans have lower down payment requirements ... Read Full Answer >>
  2. Do FHA loans have private mortgage insurance (PMI)?

    he When you make a down payment from 3 to 20% of the value of your home and take out a Federal Housing Administration (FHA) ... Read Full Answer >>
  3. How many FHA loans can I have?

    Generally, the Federal Housing Administration (FHA) does not insure more than one mortgage per borrower. This is to prevent ... Read Full Answer >>
  4. Are FHA loans assumable?

    Loans insured by the Federal Housing Administration (FHA) on or after Dec. 15, 1989, are assumable by qualifying borrowers. ... Read Full Answer >>
  5. How accurate are online mortgage calculators?

    Online mortgage calculators are accurate to the extent that the calculator itself is asking for the right pieces of information ... Read Full Answer >>
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