In the same example, what percentage origination fee did Henry agree to pay?

• A. 2%
• B. 0.5%
• C. 1%
• D. 3%

Answer: (C)

Origination fee is the lender’s charge for processing and underwriting a loan. It’s usually shown as a percentage of the loan amount and is paid at closing (though it can sometimes be financed). In this scenario, Henry agreed to pay one percent as the origination fee, so the fee is 0.01 times the loan amount. For a concrete figure, a $300,000 loan would have a $3,000 origination fee. This fee is separate from discount points (which are prepaid interest to lower the rate). The other percentage options would yield different dollar amounts, but the described agreement specifies one percent, so that’s the correct figure.