It Costs $10,936 to Originate the Average Loan. Where Does That Money Go?
Originating the average mortgage now costs $10,936, according to the Mortgage Bankers Association. That figure covers everything it takes to get a loan from application to closing: the people who process, underwrite, and fund it, the vendors and technology involved, and every fixed cost spread across the file. Personnel is by far the largest piece of it.
What's actually included in the cost to originate a loan? The cost to originate covers the full production side of a mortgage, not just the loan officer's commission. That means compensation for loan officers, processors, and underwriters, vendor costs like credit reports and verification services, technology and LOS costs, and the fixed overhead of running a production operation, all divided across the loans a shop actually closes in a given period.
Where does the $10,936 actually go?
- Personnel (largest share): loan officer, processor, and underwriter compensation
- Vendor costs (meaningful and rising): credit reports, verifications, appraisals
- Technology (fixed, per-loan basis): LOS, POS, and other production software
- Overhead (spread across volume): facilities, compliance, general operations
Freddie Mac's Cost to Originate research is direct about which category dominates: personnel compensation accounts for the largest share of what it costs to produce a loan, more than vendor fees, more than technology, more than any other single category.
Why has this number been climbing? Three things are happening at once. In a higher-rate environment, fewer loans close, so fixed costs get spread across a smaller base, and the per-loan number rises even if total spending hasn't changed. Vendor costs, including the price of a credit report, have gone up several times in recent years. And the most labor-intensive parts of the process, processing and underwriting in particular, haven't been automated at the same rate as the borrower-facing application experience. The industry has gotten good at making the first step of a loan faster. It hasn't gotten as good at making the middle of the file cheaper.
Is this a new problem, or has it always been this expensive? It's worse than normal, but not unprecedented. Origination costs spiked even higher during 2023, when production expenses topped $13,000 per loan industry-wide. Today's number sits below that peak but well above the longer-run pattern the industry has typically seen over the better part of two decades. The direction matters as much as the level: this cost has been climbing, not settling.
What does this actually mean for a brokerage? An industry average is a useful benchmark, but it isn't a diagnosis. Knowing that personnel is the largest cost category industry-wide doesn't tell you where it's showing up inside your own shop, or whether your team is structured to match the volume you're actually running. That's a different question, and it's the one worth asking next.
FAQ
What is included in the cost to originate a loan? Personnel compensation for loan officers, processors, and underwriters, vendor costs like credit reports and verifications, production technology, and general overhead, divided across the loans closed in a given period.
What's the biggest driver of the cost to originate a mortgage? Personnel compensation. Freddie Mac's Cost to Originate research identifies it as the largest single category, ahead of vendor and technology costs.
Has the cost to originate a loan gone up or down recently? It's been climbing. Today's figure remains below the 2023 peak of over $13,000 per loan but is well above the longer-term historical average.
Why hasn't automation brought this number down already? Automation has made progress on the borrower-facing application process, but processing and underwriting, the most labor-intensive and highest-cost parts of the file, remain heavily dependent on people.