In which situation is an application fee normally collected by the lender?

An application fee is typically collected by the lender after the borrower expresses intent to proceed with the loan process. This fee is used to cover the costs associated with processing the loan application, which may include credit checks, processing fees, and other administrative costs. It signifies that the borrower is serious about moving forward with the loan and allows the lender to allocate resources to begin evaluating the application.

The timing of when this fee is collected is crucial; it reflects the borrower’s commitment and allows the lender to start work on underwriting the loan. Collecting the fee at this stage also differentiates it from earlier stages, such as an initial inquiry or pre-qualification, when no formal application is made.

The other choices suggest collecting fees at times when the borrower has not yet committed to the application process, or at later stages when all costs are typically settled at closing, which doesn't align with typical industry practices for application fees.