Blog Articles from Allegiant Mortgage, LLC

What is a borrower paid vs. lender paid transaction?

March 22nd, 2015 5:17 PM by Rose Tignor

      A broker originator must choose who will pay their origination fee, these are known as a “borrower paid transaction” or a “lender paid transaction”.  A borrower paid transaction allows the origination to be paid from the borrower’s own funds or from the seller’s agreed closing cost allowance but can never be paid from the lender’s credit for the interest rate.  A lender paid transaction allows the origination to be paid solely from the lender credit given for the interest rate but no additional compensation can be received from the borrower or seller.

This difference in reporting requirements is why you’ll see an enormous difference in a GFE from a broker versus a GFE from a lender.  The costs from the broker may seem high when in reality brokers are able to offer “lender credits” to offset the charges.

 The most important factor to consider when comparing GFE’s is using an apples-to-apples comparison.  Compare the quoted interest rate, term, loan type, and required funds to close.  Many times brokers can offer lower rates and lower required funds to close even though the total costs may be higher than what’s disclosed on a lender GFE.  Don’t fall into the trap of only looking at the total cost of the loan.  Origination fees are one of the largest fees paid in connection with a mortgage; however other fees will be discussed in subsequent posts.

Posted by Rose Tignor on March 22nd, 2015 5:17 PM

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