Finance
Which of the following accurately describes the purpose of a 'loan origination fee'?
AIt compensates the appraiser for evaluating the property
BIt compensates the lender for processing and underwriting the mortgage application✓ Correct
CIt pays for the title insurance policy
DIt covers the cost of the credit report and appraisal
Explanation
A loan origination fee is a charge by the lender (or mortgage broker) for processing, underwriting, and creating the mortgage loan. It is typically expressed as a percentage of the loan amount (e.
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Key Terms to Know
Appraisal
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
Title InsuranceInsurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
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