How mortgage loan originators are compensated

How mortgage loan originators are compensated

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.

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Work Environment About this section

Most loan officers work full time.

Most loan officers work full time.

Loan officers held about 322,100 jobs in 2020. The largest employers of loan officers were as follows:

Credit intermediation and related activities 82%
Management of companies and enterprises 4
Automobile dealers 3

The credit intermediation industry includes commercial banks, savings institutions, and mortgage companies.

Loan officers who specialize in consumer loans usually work in offices. Mortgage and commercial loan officers may work outside the office and meet with clients at their homes or businesses.

Work Schedules

Most loan officers work full time, and some work more than 40 hours per week.

Pay About this section

Loan Officers Median annual wages, May 2021 Financial specialists $77,300 Loan officers $63,380 Total, all occupations $45,760 Note: All Occupations includes all occupations in the U.S. Economy. Source: U.S. Bureau of Labor Statistics, Occupational Employment and Wage Statistics

The median annual wage for loan officers was $63,380 in May 2021. The median wage is the wage at which half the workers in an occupation earned more than that amount and half earned less. The lowest 10 percent earned less than $32,520, and the highest 10 percent earned more than $138,310.

In May 2021, the median annual wages for loan officers in the top industries in which they worked were as follows:

Automobile dealers $86,270
Management of companies and enterprises 75,360
Credit intermediation and related activities 62,950

Compensation varies widely by employer. Some loan officers are paid a flat salary; others are paid on commission. Those on commission usually are paid a base salary plus a commission for the loans they originate. Loan officers also may receive extra commission or bonuses based on the number of loans they originate or how well the loans perform.

Most loan officers work full time, and some work more than 40 hours per week.

What Is the Average Salary for a Loan Officer Assistant?

There isn't an average salary for a loan officer assistant, as it depends on too many factors from the company where the assistant is employed, if they work hourly or for an annual salary, and experience. According to the BLS, financial clerks who may do similar work as an assistant to a loan officer earn a median salary of $41,520.

8. Average Pay For Mortgage Loan Officer

The average smaller mortgage pays compensation plans would create Aims to waive loan officers make six-figure right after six months of training. Meet.(24)

The average salary for a Mortgage Loan Officer is $49097. Visit PayScale to research mortgage loan officer salaries by city, experience, skill, employer and (25)

Their employers often do not pay them on an hourly basis, If you’re a mortgage loan officer who is not being paid overtime in Connecticut, (26)

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.

How Much Does a Loan Officer Make an Hour?

  • Some loan officers are paid hourly if they work at big retail banks
  • And may not actually be paid on their loan volume
  • But many loan officers are paid commission-only in lieu of a base salary
  • Which you can break down into hourly wages at year-end (it may often be much better than a guaranteed hourly wage)

As noted, MLOs are typically not paid hourly, and are instead paid commission for the loans they bring in and fund.

This means total compensation can range significantly based on the sales performance of the loan officer in question. It also depends on how much a loan officer makes per loan.

If the LO works for a small shop and has very little support, they might make a mortgage point or two per loan. By that, I mean 1-2% of the loan amount, which may or may not be split with their broker or mortgage company.

On a $500,000 loan, we’re talking $5,000 – $10,000, less any costs and splits. As you can see, the money can be really good if you’re even mildly successful in this industry, especially if you operate in an expensive region of the country.

Conversely, those who work at big banks and credit unions and are essentially fed a constant stream of clients via walk-ins, incoming phone calls, and the like, may only receive a small commission relative to those going it alone.

For example, we might be talking about 20-30 basis points, or bps, per loan closed. Represented as a fraction, that’s .20% to .30% of the loan amount. Using the same $500,000 loan amount, that’s $1,000 to $1,500 per loan. Still good, but not as lucrative as our earlier example.

However, this latter group might get a small base salary, along with benefits like 401k and insurance and so forth. And as noted, they get leads, which can be huge for the individual who is unable or unwilling to chase after new business.

If you work for a wholesale mortgage lender and are an Account Executive (the LO equivalent), the commission might be even lower, sometimes less than 10 bps per loan.

Lastly, let’s talk about quotas. Sometimes the company you work for will have a monthly quota that must be met to get paid the higher rates of commission.

So if you don’t close X million per month, you might get paid a lot less, possibly just a fixed dollar amount per loan, such as $250 or $500.

Be sure to take a good look at the company’s compensation package so you fully understand all the particulars. And if you don’t, speak up and ask for clarification.

2. The best tools for the job

While technology has made financial services more efficient overall, mortgage banks in particular haven’t kept pace. What other reason could there be why so many lenders rely on physical paper and fax machines to share information?

Using antiquated tools is not only slow and annoying, it’s also a failure to use the best tools for the job. Making even a single loan involves handling huge amounts of data, performing complex calculations, and validating thousands of rules. Compared to human loan officers, computers are orders of magnitude faster, more accurate, and more efficient at doing these things.

A 2013 Oxford economic study of jobs susceptible to automation determined that the traditional role played by loan officers has a 98% likelihood of being replaced by computers.1

We don’t fully agree that loan officer jobs should be automated. We believe:

  • Computer systems should do the calculations.
  • Borrowers should have direct, transparent access to these systems.
  • Human loan officers should be available to offer support and expert guidance to borrowers — provided they aren’t being paid commission that skews their interests.
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Education Requirements

Loan originators usually hold a bachelors degree and have a strong understanding of business accounting and finance. The BLS does note, however, that individuals who don’t have a four-year degree may still be able to become loan officers if they have work experience in banking, customer service or sales. Mortgage officers must also obtain a license to practice. The licensing process requires 20 hours of coursework, passing a licensing exam and submitting to a criminal background check.

Compensation for mortgage officers can be based on commission, salary, or a combination of the two. BLS statistics show that, as of May 2017, the median average salary for mortgage loan originators was $64,660. This means that 50 percent of loan officers made more than this amount and the other half made less. The bottom 10 percent of earners made less than $32,670 annually and the top 10 percent earned more than $135,590.

Industry

According to the BLS, loan officers typically work from offices, either in bank branches or other professional facilities. However, they may have to commute regularly to meet with clients elsewhere. Most work full-time.

6. Loan Officers : Occupational Outlook Handbook Bureau of

Some loan officers are paid a flat salary; others are paid on commission. Those on commission usually are paid a base salary plus a commission for the loans (17)

Jul 27, 2020 — Just how are mortgage loan officers compensated? Loan officers usually do not get paid if a prospective borrower decides not to buy or (18)

Feb 3, 2021 — How does a mortgage broker get paid? Mortgage broker commissions or fees are usually paid by the lender after the loan has closed, so working (19)

How much do Mortgage Loan Officer jobs pay a month? The average monthly pay for a Mortgage Loan Officer Job in the US is $6146 a month.(20)

If your loan officer works for a large FDIC bank

Many of the larger, nationally known banks pay their loan officers differently than the smaller mortgage banks/brokers. They will pay the loan officer a base salary and a small bonus amount based on the loan amount, not the total fees on a file.

Or, simply put — if a loan officer helps you with your mortgage and your loan amount is $200,000 and the loan officer is paid “30 bps”, the loan officer would make 30 basis points on $200,000 or $600.

One advantage to working with these loan officers is that they usually have a large brand behind them — so you have probably “heard of” the lender that they work for. Another advantage to working with these loan officers is that often times, their lender will be willing to “originate at a loss” mortgage loans so that they will have the ability to cross-sell a checking account, savings account, credit card or other bank-related products.

One disadvantage to working with a loan officer who works for a large FDIC bank is that they usually have relatively little rate and fee flexibility. Their rates and fee structures by and large “are what they are.”

Best-paid skills and qualifications for Loan Officers

Most recommended skillSales Experienceearn +10.60% more The jobs requiring this skill have decrease by 15.46% since 2018. Loan Officers with this skill earn +10.60% more than the average base salary, which is $182,113 per year.2011201220132014201520162017201820192020Job Trend Job TrendYearNumber of job openings on Indeed requiring this skillChange from previous year201136increase by 3620129145increase by 25302.78%201334437increase by 276.57%201447429increase by 37.73%201514272decrease by 69.91%201613874decrease by 2.79%201710862decrease by 21.71%20187884decrease by 27.42%20196665decrease by 15.46%

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Top licenses
NMLS
+28.08%salary

Top fields of study Medical Degree +21.81%salary

More critical skills and qualifications that pay well

Salaries by qualifications

Top Licenses Salary Job openings Companies 870 jobs 3,325

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Loan Officer Educational Requirements

  • Depending on where you work you may need to be licensed
  • It may easier to get started at a big bank than a smaller mortgage shop
  • You’ll likely also have to pass a background check and get fingerprinted
  • And potentially complete continuing education

Interestingly, you can become a loan officer with no experience. Yep, it’s a potentially high-paying job that also welcomes newbies.

In fact, mortgage loan officers don’t even need a bachelors degree, let alone a high school diploma to gain employment with certain brokers and mortgage lenders.

With the larger financial institutions, a college degree will likely be obligatory without notable sales experience.

In terms of licensing, it depends on the state, company, and specific position. These days, many loan officers need to be licensed, though there are still many positions at large retail banks that don’t require an MLO license.

However, most MLOs need to be registered, perform a background check, and get fingerprinted. This is to protect the public from unscrupulous individuals working for mortgage companies.

If you do need to be licensed, it’s not the end of the world. In most cases, you simply need to take 20 hours of pre-licensure education, pass a test, and complete eight hours of continuing education annually.

The takeaway is that it might be easier to get a job at a retail bank, but these loan officers may be less knowledgeable as a result, and they could be lower paying jobs.

Of course, they may also be the ones that tend to work in call centers and simply plug in numbers into a loan application, as opposed to coming up with creative loan solutions. So they may not need to know very much.

Loan Officer Benefits

Most full-time loan officers receive standard benefits like health, vacation, and access to retirement accounts. Most loan officers work for a bank or private company, so the benefits vary depending on their employer.

4. Financial intermediation might not even be a good option

Unrelated to mortgages, the investment management industry has an interesting example of how getting rid of financial intermediation might be best for everyone. “Index funds” automatically track and invest in markets, as opposed to using the traditional model of human fund managers being paid to actively choose investments.

As a result, not only do index funds cost significantly less — they usually outperform their human-managed counterparts, according to the SPIVA. In fact, this fund management strategy has been so successful that index funds have grown to account for 34% of market share.3

This example of index funds is a good reminder that consumers might benefit from other “disintermediated” financial services (such as mortgages), as well.

Job Growth Trend

According to the BLS employment opportunities for loan officers should grow by 11 percent between 2016 and 2026. This is due to expected economic growth, which will spur real estate sales. The BLS does caution that the number of bank branches, where many loan officers work, are expected to decline, which could disrupt employment growth somewhat.

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