Loan Application Fee
What is 'Loan Application Fee'
A loan application fee is a fee charged to a potential borrower for processing an application for a loan. Loan application fees can be required for all types of loans.
BREAKING DOWN 'Loan Application Fee'
A loan application fee is one type of fee a borrower may be charged for obtaining a loan. Different from other types of loan fees, the loan application fee is an upfront charge that a borrower is required to pay when they submit a loan application.
Loan application fees will vary by lender and many lenders will not charge a loan application fee at all. Online lenders generally require the lowest application fee with automated processing that does not require some of the added expenses associated with traditional and in person loan consultations. Loan application fees are typically the most common in a mortgage loan which includes many ad hoc fees in addition to the monthly interest. Working with a mortgage broker can also increase the likelihood of a loan application fee since the broker works as an intermediary on behalf of both the borrower and lender.
Loan Application Fee Due Diligence
Most application fees are nonrefundable which presents a high risk for low credit quality borrowers. Therefore, borrowers should first do due diligence on their own credit score and the standard approval requirements for the type of loan they wish to obtain in order to ensure that the application fee will not be lost with a credit application rejection. Subsequently borrowers should also seek to compare application fees across lenders. Loan application fees are one fee that can vary significantly among different types of lenders. Loan application fees on a mortgage loan can range from $0 to $500. Thus, researching loan options and application fees with various competitors can potentially result in hundreds of dollars saved. Some lenders may also be willing to waive the application fee through negotiation or comparison to other competitor market fees.
Loan application fees are just one type of fee lenders can charge on a loan. Other fees may include an origination fee and monthly service fees. In general fees help a lender to cover costs associated with underwriting and processing a loan. In the credit market, mortgage loans tend to have the broadest fee requirements. Mortgage lenders may charge origination fees, appraisal fees and administration fees. In some cases a mortgage lender may bundle their fees by charging a closing points fee which is a comprehensive fee calculated as a percentage of the principal balance. (See also: Watch Out for "Junk" Mortgage Fees)