1. Your own best interest

It’s fair for consumers to question whether mortgage loan officers are acting in their best interests. A useful starting point is to ask: How are these loan officers compensated?

Loan officers typically get paid in two ways: 1. Commission, calculated as a percentage of the total loan amount 2. Incentives for selling certain financial products or reaching quotas

Both sources of compensation can create a conflict of interest. Let’s think about commission. Since it’s a percentage of the total loan amount, the bigger the loan they sell you, the bigger the commission. This issue played itself out for years leading up to the 2008 subprime mortgage crisis. Banks and mortgage brokers aggressively pushed mortgages that borrowers couldn’t afford, while loan officers got paid handsomely to intermediate. If you’ve seen the 2015 film The Big Short, you’ll be familiar with this scenario.

In the case of sales incentives, you’ve probably seen that Wells Fargo was ordered to pay over $185 million “to resolve allegations that the bank’s sales quotas and incentives pushed employees to open millions of unauthorized accounts” and now faces an inquiry by the U.S. Department of Justice. While this case does not involve mortgages, it clearly demonstrates the problem with sales incentives.

What happened is this — the company set very aggressive goals to cross-sell other Wells Fargo products. For example, bank employees who cross-sold a certain number of checking accounts received incentive pay. To cash in on these incentives, over 5,300 employees set up more than 2 million fake accounts without customer consent. Customers got duped, the employees got fired, and Wells Fargo got in serious trouble.

It’s clear that both commission and incentives are horrible at aligning a loan officer’s interests with your own. To avoid any such conflicts, Better Mortgage pays loan officers a fair salary with no commission. Our staff offers support, not sales, to ensure alignment with your best interest.

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.

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4. How mortgage loan originators are compensated First

Aug 28, 2018 — Much like a real estate agent, MLOs negotiate their percentage fee — commonly referred to as commission — with their broker. At small boutique (9)

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 (10)

Most MLOs in North Carolina are paid a base salary plus commission. The potential to earn sales commission on every loan that goes through is the reason why (11)

How do mortgage loan officers get paid? — Mortgage originators typically work solely on commission, getting paid only if the loan closes.(12)

Dec 8, 2020 — 2. How does a mortgage broker get paid? Mortgage brokers are most often paid by lenders, sometimes by borrowers, but, by law, never both. That (13)

Loan officer average salary

Many loan officers are paid a salary or hourly rate, and others earn commissions and incentives on top of a lower base salary. Wage structures vary depending on the employer as well as the loan officer's job performance (how many loans you close). Other contributing factors include:

Education

Most employers will require their loan officers to hold at least a bachelor's degree, with some preferring a master's in finance or economics.

Credentials

Certain types of loans require originators to hold special credentialing, such as the MLO, or mortgage loan originator license. These credentials often require coursework and exam to be completed successfully, as well as a clean background and credit check. These credentials must be renewed annually.

Experience

Your salary will increase with experience. Whether it's getting an annual pay increase or closing bigger and more frequent commission-based products, higher pay comes with industry experience. Additionally, as your experience mounts, you'll be eligible to be hired into higher-paying roles with more responsibility.

Geographical location

Certain parts of the U.S. pay higher salaries due to the higher cost of living. As one could reasonably suspect, the highest salaries (and housing costs) can be found in New York, Mississippi and California, while some of the lowest wages in the industry are found in Louisiana, South Dakota and Hawaii.

Size of employer

Larger institutions tend to have higher budgets for higher salaries. This comes into play when they're seeking the most qualified candidates to fill important roles within their organizations.

This occupation is expected to trend upwards for the next few years, and opportunities can be found all over the U.S.

  • National average salary: $80,818 per year

  • Some salaries can range from $14,000 to $241,000 per year.

Related: Learn About Being an Underwriter

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.”

What Does a Loan Officer Do on a Daily Basis?

  • Selling is the main focus of a loan officer
  • That means bringing in new customers to apply for home loans
  • Whether it’s a refinance loan or a purchase loan
  • So you can earn a commission when it eventually funds

The broker or bank, or whomever employs the loan officer, may provide sales leads to the loan officer, or they may be completely on their own when it comes to acquiring business, making up their own sales and marketing to pitch potential borrowers.

If you work at a large bank or call center, you may be fortunate enough to just take incoming phone calls.

That means you’ll sit in a cubicle all day and field phone calls. You could also be required to follow-up with customers who expressed interest.

The good part is that you won’t have to find prospects on your own. That can be the hardest part.

If you work for a broker or a small company, you may still be provided with leads, though the quality could be less than desirable. That means you will have to network, make contacts, and market yourself and your services.

This entails trying to get individuals to finance home purchases or refinance their existing mortgages. That’s it. When that happens, you generally get paid.

Often, loan officers will implicitly or explicitly partner with a real estate agent or office so they can provide financing to their home buying prospects.

If you’ve ever purchased a home, you’ve likely had the preferred lender’s contact info thrown your way when it comes time to fill out a loan application.

A loan officer may get these leads and run no-obligation pre-approvals for those clients to win them over. Often, a real estate agent’s recommendation will end up providing financing since borrowers don’t tend to shop around.

In any case, your role as a loan officer is to sell and that’s pretty much it. If I had to sum up a loan officer jobs description, I’d simply say selling.

Sure, you’ll have to put your clients at ease throughout the loan process, and communicate with your staff, but the main objective is sales.

You won’t be doing the loan underwriting, nor will you approve loans that come in the door. That’s not part of your job description.

Loan officers at smaller shops and independent companies need to self-manage their time, and strive to call out up to 100 contacts a day. When demand for loans is low, it can be really tough.

Once a call is successful and a loan officer is able to retrieve a prospective customer’s information, they need to secure financing for their client.

If you work for a broker, you will also need to work with third-party banks and lenders (and Account Executives) to secure financing.

If you work directly for a bank or mortgage lender, you will need to familiarize yourself with the company’s entire product suite so you know what it is you’re selling.

In both situations, your main objective will be to originate loans and assist in processing them, at the same time making sure your borrower is attended to during the entire loan process.

Required Education

Most loan officers need a bachelor’s degree, usually in the field of business or finance. You may be able to become a loan officer without a bachelor’s degree, but you need to have related work experience in sales, customer service or banking.

Mortgage loan officers must have a Mortgage Loan Originator license. This license requires at least 20 hours of coursework, a passing grade on the exam and a background and credit check. You must renew your license every year. Individual states may also have additional requirements.

A number of schools and banking associations offer courses, training programs or training certifications for loan officers. Outside of mortgage loan officers, certification isn’t required, but it shows that you know what you’re talking about when it comes to the job, which may lead to better employment opportunities.

The median annual wage for loan officers is $63,650 according to the United States Department of Labor. The median wage means half the loan officers make less than this amount and half make more.

Loan officers for automobile dealers had the highest compensation with an annual median wage of $85,140, followed by loan officers who work in management of companies and enterprises with a median annual salary of $68,340.

A loan officer’s income depends on their employer. Some are paid a flat salary, while others are paid a base salary plus commission. The amount of your commission depends on the company where you work.

One survey showed that 45 percent of firms paid between 76 basis points to 150 basis points commission on each loan. Each basis point is 1/100th of one percent, so 76 basis points are just over ¾ of one percent. This means on a $100,000 loan, a loan officer would make around $760 commission.

Generally, the more work you have to do to generate clients on your own, the higher your commission. For example, someone who works for a small company with little support may get 1-to-2 percent of the loan amount. Someone else who works for a large company and is given a list of clients to contact might make 20-to-30 basis points or .2-to-.3 percent of the loan amount.

5. You can do better

We’ve established four reasons why it’s bulls#!t for you to get stuck with higher rates and origination fees to effectively pay for loan officer commission. But the very best reason is — you don’t have to.

You can choose to work with Better Mortgage. We have industry-leading rates. We don’t charge origination fees. And our loan officers don’t get paid commission, ever.

As a Better Mortgage borrower, you can complete your entire digital mortgage process online. You have direct access to our systems, which:

  • Match you to the largest mortgage end investors in the world (including Fannie Mae).
  • Find the best mortgage at the lowest rate for your specific situation.
  • Guide you through the application process with 100% transparency.

Our loan officers are here to support you with any questions or concerns you may have (which is what humans are actually good at). But they don’t get paid commission. You deserve better than that.

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  1. Frey, Carl Benedikt and Osborne, Michael A. (2013), “The Future of Employment: How Susceptible Are Jobs to Computerisation?”

  2. Philippon, Thomas, “Finance vs. Wal-Mart: Why are Financial Services so Expensive?”

  3. Bogle, John (2016), “The Index Mutual Fund: 40 Years of Growth, Change, and Challenge”

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