Finance
A NC lender's 'origination fee' on a mortgage loan represents:
AThe interest charged on the loan
BA fee charged by the lender to cover the costs of processing and underwriting the loan✓ Correct
CA prepayment penalty
DThe cost of the title search
Explanation
A loan origination fee compensates the lender for processing, underwriting, and administering the mortgage application and loan documents.
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Key Terms to Know
Discount Points
Prepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
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.
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