An origination fee is a charge by a lender for processing a new loan application. This fee is typically a percentage of the total loan amount and is deducted from the loan proceeds. It covers the costs associated with evaluating and approving the loan, such as credit checks and administrative expenses. Borrowers should be aware that origination fees can vary significantly between lenders and loan types. Understanding these fees is important when comparing loan offers, as they can affect the overall cost of borrowing. Always read the loan agreement carefully to see how these fees are structured.