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What is a mortgage application fee, and do you have to pay it?
While applying for mortgage prequalification and preapproval typically won’t cost you a dime, lenders may charge you a mortgage application fee once you decide to move forward with an official loan application.
The structure of mortgage application fees varies by mortgage lender, and in some cases, you can avoid paying this fee at all. Understanding the application charge can help prepare you for closing day.
Learn more: Closing on a house — What to expect and how to prepare
In this article:
What is a mortgage application fee?
A mortgage application fee is a closing cost you pay a mortgage lender when you apply for a home loan. It’s usually nonrefundable, which means you won’t get your money back even if the lender denies your application. So, before applying for a mortgage, check that you meet all the borrower eligibility requirements and double-check your application for errors or incomplete information.
Read more: The credit score needed to buy a house
How much is a mortgage loan application fee?
Mortgage application fees vary depending on the lender. It’s rare for a mortgage company to charge more than $500 for an application, though it does happen occasionally.
Not all lenders charge a mortgage application fee, so shop for the best lender to avoid paying this upfront. Note that mortgage application fees do not apply to preapproval or prequalification applications and are only necessary when officially applying for a mortgage.
Do I have to pay a mortgage application fee?
Some mortgage lenders charge application fees while others don’t, so you can avoid this fee if you shop around. And given the competitive nature of the mortgage industry, some lenders may have wiggle room in regarding fees to attract new customers. In some cases, lenders may even be willing to lower or waive your mortgage application fee — so don’t be afraid to negotiate.
Read more: The best mortgage lenders
Mortgage application fee vs. mortgage origination fee
An origination fee is an up-front fee mortgage lenders charge for creating, processing, and funding your new home loan. It’s calculated as a percentage of your loan amount — typically between 0.50% and 1%.
Some mortgage lenders will roll your application fee into your loan origination fee, while others may charge them separately. Regardless, you’ll pay these fees on closing day. Read your Loan Estimate and Closing Disclosure carefully, and check with your lender if you have any questions about how these fees are structured.
Learn more: Mortgage lender fees — How they differ from other closing costs
Other common mortgage fees
A mortgage application fee isn’t the only cost to consider if you get a home loan. You’ll also want to factor the following expenses into your budget.
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Origination fee. Origination fees cover lenders’ administrative expenses for creating and processing your mortgage. Some lenders consider an application fee to be part of their origination fee. You may also see this as an underwriting fee or processing fee.
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Credit report fee: Mortgage lenders charge a fee to do a hard credit check and assess your creditworthiness as a potential borrower.
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Home appraisal fee. Most lenders require you to schedule a home appraisal to verify whether the amount you want to borrow matches your property’s worth.
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Inspection fee. This covers the cost of a professional home inspection to identify potential issues with the property before closing.
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Attorney fees: If your state requires an attorney to be present at closing, you must also pay a real estate attorney fee. Even if you aren’t required to hire a real estate lawyer, you may decide their help is worth the cost.
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Title search fees. You’ll pay a title search fee for a title company to track down any issues with the property title, such as deed restrictions or liens against the property.
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Lender’s title insurance. This protects your lender if an ownership dispute or an issue that didn't appear in the title search arises after closing.
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Mortgage insurance. If you put down less than 20% on a conventional loan, you may be required to pay private mortgage insurance (PMI). FHA loans also require mortgage insurance. This type of insurance protects the lender should you default on your mortgage payments. With VA loans and USDA loans, you’ll pay a one-time funding fee or guarantee fee, respectively.
Dig deeper: Cash to close — What you’ll owe on closing day
Mortgage application fee FAQs
Is it normal to pay a mortgage application fee?
Yes, it’s customary for mortgage lenders to charge a fee when you submit your official application. You may be able to negotiate to waive this fee, though, and some lenders don’t charge application fees at all.
Do banks charge for mortgage preapproval?
Mortgage preapprovals are typically free, and you’re not obligated to work with that specific lender or borrow the full preapproved amount. The mortgage application fee is only required once you decide to formally apply for the loan with a lender.
What is the cost of a mortgage application?
There is typically no cost to apply for prequalification or preapproval. However, the cost to submit your official application for a mortgage loan may range from $0 to roughly $500.
This article was edited by Laura Grace Tarpley.
