Guide. Supporter. Educator. A mortgage loan originator wears many hats while finding a residential loan that will work for a borrower and steering the prospective homeowner or refinancer through the whole application process.
The person or entity is the original point of contact for borrowers. Their role is regulated to prevent the kind of mortgage fraud that occurred during the housing crisis and financial meltdown of 2008.
Here’s what you should know about what they do, how they’re regulated, and how they can help you get the right loan to the closing table.
What Is a Mortgage Loan Originator?
A mortgage loan originator (MLO) evaluates and recommends approval of residential loan applications on behalf of customers. Some work directly for a mortgage lender; others, called mortgage brokers, are MLOs who offer options from several lenders.
MLOs might be paid a salary plus commission, but commission only is far more common. They must be licensed in the states where they do business or under the umbrella of the bank, bank subsidiary, or credit union that employs them.
MLOs work to find a mortgage for each borrower’s unique situation. They must be excellent communicators since they guide people through the mortgage process.
They educate the borrower about different kinds of mortgages, the application process, and how mortgages work, and ensure legal compliance and completeness to close the loan.
Since MLOs often work on commission, it’s usually in their best interests to find a compatible loan for the borrower that will make it to the closing table. They don’t get paid if the loan falls through. To get your business, it’s also in their best interests to offer the most competitive terms possible.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
What Is the Difference Between a Mortgage Loan Originator and a Mortgage Loan Officer?
The upshot: Regulators and some others refer to mortgage loan officers employed by financial institutions as “mortgage loan originators.”
A mortgage loan originator is anyone who negotiates or takes a residential mortgage application for a client with the expectation that they will be paid for their services.
What Does a Mortgage Loan Originator Do?
MLOs are responsible for taking a loan from application to closing. They may also negotiate terms of a residential mortgage on behalf of a client.
Responsibilities of a mortgage loan originator may include:
• Processing the customer’s application
• Explaining the different types of mortgages available to a borrower
• Asking for documents on the applicant’s background and financial information
• Keeping track of documents
• Submitting documents to underwriting
• Relaying messages from underwriting
• Scheduling a home appraisal
• Addressing any home appraisal issues with the client
• Asking for more documents as closing gets nearer
• Scheduling the close
• Answering questions the borrower may have
• Ensuring compliance with applicable laws
• Developing relationships with real estate agents, builders, and individual clients
How to Become a Mortgage Loan Originator
Becoming a mortgage loan originator typically requires a bachelor’s degree and on-the-job training. Nonbank originators also need to be licensed.
Licensing
MLOs who are employed by banks, bank subsidiaries, or credit unions do not have to obtain a loan originator license. All others must be licensed in the states they do business in and register with the Nationwide Multistate Licensing System & Registry (NMLS).
General state license requirements include:
• At least 20 hours of pre-licensing education
• Authorization to provide a credit report and criminal record
• General character standards and demonstrated financial responsibility
• Passing the NMLS written test
• Sponsorship by a company already registered with the NMLS
Licensing became required in 2008 following the housing collapse. It increases consumer protection and reduces mortgage fraud.
Average Salary
The median pay for mortgage loan officers in 2023 was $69,990 per year, according to the Bureau of Labor Statistics.
But because mortgage loan originators typically work solely on commission, earnings can vary widely based on the area, the number of closed loans, and the amount of the closed loans. The commission averages 1% of the loan amount.
Do I Need a Mortgage Loan Originator?
A mortgage loan originator is needed when you need a new mortgage. Few mortgages are assumable by a buyer, so homebuyers will most likely need a new mortgage for their purchase or refinance and will need a mortgage loan originator.
You will most likely need a new mortgage for your purchase or refinance and will need a mortgage loan originator.
How Do You Find a Good Mortgage Loan Originator?
A good mortgage loan originator may be able to secure a loan that works for your situation and aptly guide you through the process. Want to know how to find a good loan originator? Here are a few tips.
Shop Around for a Mortgage
One of your most powerful tools for finding a good mortgage loan originator is to shop around for a mortgage. Meet the people who will work with you on your mortgage and get loan estimates for the specific type of mortgage you’re looking for.
• Ask for quotes from your bank or credit union. Your existing relationship with a bank may be valuable to them and they may offer good terms.
• Get recommendations from family or friends. From people who have been there and done that, you may find an originator that has great rates and is incredible to work with.
• Conduct an internet search. You’ll find plenty of mortgage loan originators listed on the internet with a bounty of reviews. Try calling a few and you may find a loan officer with competitive rates.
Compare a Direct Lender With a Mortgage Broker
When you’re looking for a good mortgage loan originator, you’ll come across two main ways to find a mortgage for your home: mortgage brokers and direct lenders.
• Direct lenders are the providers of the mortgage. When you go to a lender and apply for a loan, you’re working directly with the lender, which makes a decision without a middleman.
• Mortgage brokers work for borrowers to find the best loans and terms for their individual situations. They may be able to point clients to a lender they would not have known about otherwise and save them money in the process. Lender commissions to brokers may span 0.50% to 2.75% of the loan amount, but lenders typically add the costs to the borrower’s loan. It’s a good idea to check credentials with the NMLS.
Both can help get you a mortgage that may work for your situation, but you may find that you prefer one over the other when you’re looking for a good loan mortgage originator.
If you apply for a mortgage with several, it’s smart to compare the loan terms being offered in the loan estimate that you will receive.
Have an Idea of What Type of Mortgage You’re Looking For
Some lenders may specialize in a certain type of mortgage, so if you know what you’re looking for, you may be able to find a good loan originator more easily.
If you’re looking for a renovation loan, for example, you might want to seek out a lender specializing in that type of loan.
Be Wary of Deals and Offers You See in Ads
Some lenders might advertise low payments or low interest rates, but those may not be what you’d end up getting. By law, lenders are required to disclose the loan terms to you on a standard form called a loan estimate after you’ve applied for a mortgage.
Using this form can help you compare loans fairly as it will list the mortgage APR, term, points, and all fees you’ll need to pay to engage the services of a particular lender.
Know What Questions to Ask
If you interview mortgage originators, certain questions can help you determine if you’ll be a match or not. Don’t know what to ask? Take a look at these mortgage questions.
The Takeaway
Finding a good mortgage originator is worth the time it takes to explore your options and interview potential candidates. After all, getting the right mortgage, as an initial borrower or a refinancer, can mean significant savings — not just at origination but over the life of the loan.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
FAQ
What questions will a mortgage loan originator ask?
A mortgage loan originator who is helping you prepare a home mortgage loan application will want to understand your income (how much you earn and how reliable your income stream is), your credit and work history, and your debts. Be prepared to answer questions about your salary, whether you are a W-2 employee or a freelancer, and how much you owe on any student loans, car payment, or other debts.
Is a mortgage loan originator the same as an underwriter?
No, a mortgage loan originator (MLO) is not the same as an underwriter. An MLO, sometimes also called a mortgage loan officer, is a person or business that helps you apply for a mortgage loan. An underwriter is the person who reviews your loan application and decides whether or not to approve it and at what interest rate.
Photo credit: iStock/David Gyung
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