origination
The process of creating a new loan — including the application, underwriting, and funding stages — from initial application to disbursement.
Example
“The bank's loan origination team reviewed his income and credit before approving the mortgage.”
Memory Tip
ORIGINATION = the ORIGIN of the loan — from application to funded.
Why It Matters
Understanding loan origination helps you recognize all the costs and timeline involved when borrowing money. By knowing what happens during origination, you can better compare loan offers from different lenders and budget for fees that occur before you receive your funds.
Common Misconception
Many people think origination is just about filling out an application, but it actually includes several steps like credit checks, property appraisals, employment verification, and underwriting review. The entire process from start to finish can take weeks, not just a few days.
In Practice
When you apply for a mortgage, the lender charges an origination fee typically ranging from 0.5 to 1.5 percent of the loan amount. On a 300,000 dollar home loan, this could mean paying 1,500 to 4,500 dollars just for the origination process, and the whole procedure might take 30 to 45 days before your money is actually disbursed to close the purchase.
Etymology
From Latin 'originare' (to cause to arise) — ORIGINATING a new financial obligation.
Common Misspellings
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