Bank of America Offers Zero-Dollar Origination Fees

June 10, 2019

Bank of America has made several recent moves to reduce the borrowing costs of would-be home buyers who have faced affordability constraints. The bank's latest offer: mortgages with no origination fees for buyers with little savings for a down payment. The promotion is available through Oct. 31.

The offer applies only to loans backed by the Federal Housing Administration, Department of Veteran Affairs, Freddie Mac’s Home Possible program, and Bank of America’s own Affordable Loan Solution program.

“When you’re a borrower, it’s much easier to compare loan offers when lenders don’t charge fees because it’s a true apples-to-apples comparison,” Holden Lewis, a housing expert at personal finance website NerdWallet, told MarketWatch. “Lots of eyes are on the few lenders who don’t charge origination fees, and if they thrive by doing so, you’ll see more lenders follow their lead. A shift towards zero origination fee loans would be great for consumers because it would be easier for both home buyers and refinancers to comparison-shop and avoid unnecessary confusion.”

Bank of America isn’t the only one waiving origination fees. Nearly one in 10 borrowers say they weren’t charged fees, according to a study from LendingTree. That said, 60% of borrowers paid between $1,000 to $5,000 in origination fees. Origination fees are usually charged as a percentage of the home’s price. As such, in high-priced housing markets, home buyers may face steeper costs.

Financial experts warn home buyers to be discerning if a bank offers to waive an origination fee. Some banks may try to make up that loss in revenue by charging higher interest rates or tacking fees onto the principal of the loan, cautions Tendayi Kapfidze, chief economist at LendingTree.