What does a mortgage loan originator do?

July 8, 2020 - 6 min read

Mortgage loan officers connect borrowers to home loans

When someone buys or refinances a home, there are a number of individuals who help guide them through the mortgage process.

The mortgage loan originator (MLO) is a key part of that system. This person helps the home buyer or refinancer choose a loan, and understand all the rates and terms associated.

In short, an MLO is the essential link between a borrower and their mortgage company.

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What is a mortgage loan originator?

Mortgage loan originators, loan processors, and underwriters are all part of a team of mortgage professionals involved in creating a home loan.

One of the most important people in the process is the mortgage loan officer. Or, as they’ve become more commonly known, a mortgage loan originator (MLO).

A mortgage loan originator typically works for a bank or mortgage lender and helps mortgage borrowers in the application process.

A mortgage originator can help you find the right type of loan, as well as the best mortgage terms for you.

What does a mortgage loan originator do?

Mortgage loan originators must have a comprehensive knowledge of lending products, banking industry rules and regulations, and the required documentation for obtaining a loan.

“Loan officers evaluate, authorize, or recommend approval of loan applications for people and businesses”, according to the U.S. Bureau of Labor Statics.

This requires excellent interpersonal skills.

A good loan officer makes his or her clients feel at ease during the process, while still educating them on their decision.

Borrowing money can be a nerve-wracking experience. A good loan officer makes his or her clients feel at ease during the process, while still educating them on their decision.

Mortgage loan officers also collect and verify all required financial documentation from applicants.

They’ll use this information to determine if a mortgage borrower is qualified for a loan from the standpoint of credit-worthiness, income, and assets. They’ll also help borrowers decide which type of loan is right for them based on their finances and purchase price.

The profession involves a lot of paperwork and managing logistics throughout the loan process.

Do mortgage loan officers have to be licensed?

Prior to the housing crisis, mortgage originators did not have to be licensed.

Nowadays, consumers have far more protection when it comes to mortgage loans. All non-bank mortgage loan officers must now be licensed in the states where they originate loans.

If a loan originator is employed by a bank, a subsidiary of a bank, or a credit union, they do not have to obtain an loan originator license.

For all other mortgage loan officers, a fairly thorough process is necessary to obtain a license.

  • Show financial responsibility, character, and general fitness as a lender
  • Complete a minimum of 20 hours of pre-licensing education
  • Score at least 75 percent on the NMLS written test
  • Submit fingerprints to the NMLS for an FBI state and national criminal history background check
  • Submit an accurate and thorough personal history and experience document to the NMLS that includes an independent credit report, as well as any information regarding administrative, civil, or criminal findings in any jurisdiction

Mortgage licensing is overseen by the Nationwide Multi-state Licensing System, generally referred to as the “NMLS.” The NMLS issues licenses to prospective MLOs who meet the requirements.

How do mortgage loan officers get paid?

Mortgage originators typically work solely on commission, getting paid only if the loan closes.

This can be a good thing for you as the consumer. This gives loan originators incentive to help an applicant boost his or her chances for approval.

Once a mortgage is approved and the loan funds, the loan originator will receive a percentage of the total loan amount.

The commission percentage that loan officers receive varies from one lending institution to the next. But on average, loan originators receive approximately 1% of the loan amount in commission.

For example, if you are purchasing a $250,000 home and putting 20% down, your loan amount would be $200,000. In this case, the loan officer that helped you get from application to closing might receive a 1% commission of $2,000.

What’s a typical mortgage loan originator salary?

The average mortgage loan originator makes just over $63,000 per year, according to the U.S. Bureau of Labor Statistics.

But remember — MLOs are typically not salaried, they’re paid on commission. So a mortgage loan officer making a lot of loans in high-priced cities or markets could take home much higher pay.

That said, some newer mortgage companies are doing away with the commission-based pay model for loan officers.

Better Mortgage, for instance, has done away with MLO commissions in a bid to make lending more transparent for borrowers. In Better’s estimation, a no-commission model ensures loan officers always have the borrower’s best interest in mind.

How to choose a mortgage loan originator

Because a loan officer is such a key player in the home loan process, knowing how to choose one is essential to ensure you get the best mortgage with the best possible experience.

In addition to assisting you with your loan application, a good loan originator will have a diverse skillset.

With a proper balance of industry knowledge, communication skills, and integrity, a mortgage originator can make the complexities of a mortgage loan seem much easier — and the process a lot smoother.

The best way to know you’re working with a good loan officer is to do a little homework on him/her or their company.

Even with all the recent advances put in place by the Consumer Financial Protection Bureau (CFPB) to protect mortgage borrowers, it can still be possible to work with an unscrupulous lender.

That’s why loan officers with honesty and integrity and are a must.

The best way to know you’re working with a good loan officer is to do a little homework on him/her or their company.

Fortunately, thanks to technology, it’s easier than ever to do some quick due diligence.

A short amount of time spent online can tell you a lot. Check out social media and online review sites. You can learn a lot here, as it’s difficult for a loan officer and/or their company to avoid negative reviews.

Although technology makes it so you practically never even have to speak with a loan officer, you still should. If you can’t meet face-to-face with your loan officer, suggest a Zoom meeting.

Since real estate agents and attorneys work with loan officers every day, they folks can be a great referral source for finding a good loan officer.

By meeting your loan officer in person or online, you will most likely be able to get a sense of their work ethic and determine whether or not you will work compatibly together.

Good loan originators typically work hard to develop new business opportunities whenever possible.

They will actively work to develop a rapport with real estate agents and attorneys. Since these folks work with loan officers every day, they folks can be a great referral source for finding a good loan officer.

Be sure to check the company and the loan officer’s rating with the Better Business Bureau. Ask for references from previous clients, read online testimonials and most importantly, go with your gut.

The right mortgage loan originator for you

Whether you’re buying a new home or refinancing your existing home, the home loan process can seem like an overwhelming experience.

The right loan originator can reduce — or eliminate — that headache. So, make sure you’ve found the right fit for you and your needs.

As with other professions, whether it’s a doctor, a mechanic, or a plumber, you may need to do a little research.

But the time you’ll spend searching for the right loan originator can turn a complex mortgage experience into one that feels seamless and pleasant.

Time to make a move? Let us find the right mortgage for you

Craig Berry
Authored By: Craig Berry
The Mortgage Reports contributor
With over 20 years in mortgage banking, Craig Berry has helped thousands achieve their homeownership goals.