When you apply for a mortgage, one of the fees you’ll encounter is the loan origination fee – the lender’s charge for processing and underwriting your loan. To prevent lenders from charging excessive upfront fees, federal regulations impose a cap on these charges for many loans, especially Qualified Mortgages (QMs).
The loan origination fee cap is primarily governed by the Consumer Financial Protection Bureau (CFPB) under the Ability-to-Repay/Qualified Mortgage (ATR/QM) rule, part of the Dodd-Frank Act reforms established after the 2008 financial crisis. For most QMs, the total “points and fees” charged upfront cannot exceed 3% of the loan amount if the loan exceeds $129,539. For smaller loans, the cap percentage is higher or amounts are fixed to balance lender costs and consumer protection.
Here is the breakdown of caps for 2024 according to CFPB guidelines:
| Loan Amount | Maximum Points & Fees Cap |
|---|---|
| $129,539 or more | 3% of the loan amount |
| $77,723 to $129,538 | $3,886 |
| $25,908 to $77,722 | 5% of the loan amount |
| Less than $25,908 | $1,295 |
(Read more about the Qualified Mortgage definition and protections here.)
The “points and fees” cap includes:
- Loan origination and underwriting fees
- Application and processing fees
- Discount points paid to reduce interest rates
Excluded from this cap are fees for third-party services such as appraisal fees, credit reports, title insurance, property taxes, and homeowners insurance premiums—these are typically passed through without markup.
For example, if you take a $400,000 QM loan, your lender cannot charge more than $12,000 (3%) in total points and fees. This amount includes all origination fees combined but excludes third-party costs.
Review your Loan Estimate closely – origination charges appear in Section A on page 2. The document helps you compare lenders easily by showing all fees upfront. Remember, the cap is the maximum allowed; many lenders charge less, and you may negotiate fees or shop around for better offers.
Note that the 3% fee cap applies primarily to Qualified Mortgages. Other loan types, like personal loans or non-QM mortgages, may not have similar caps unless state laws impose different limits.
For more on understanding loan fees and the loan origination process, see our articles on Mortgage Origination Fee and Loan Origination Process.
References:
- Consumer Financial Protection Bureau, “Ability-to-Repay and Qualified Mortgage Rule,” cfpb.gov
- ConsumerFinance.gov, “What is a Qualified Mortgage?” consumerfinance.gov
Understanding the loan origination fee cap helps you manage your mortgage costs and avoid surprises at closing.
