How Much Commission Does a Loan Officer Make?

Working as a loan officer can be a lucrative career path Loan officers play a critical role in the mortgage industry by helping connect home buyers with lending options One of the biggest advantages of being a loan officer is the potential to earn substantial commissions on closed loans, But exactly how much can a loan officer make in commissions? Here’s an in-depth look at typical loan officer commission rates and earnings,

Loan Officer Commission Structures

Most loan officers earn money through commissions based on a percentage of the mortgage loans they originate. The commission structures can vary, but here are some of the most common models:

• Flat rate commission – With this structure, the loan officer receives the same percentage commission on every loan no matter the size. For example, 1% of the loan amount on every loan closed.

• Tiered commission – With tiered commissions, the percentage rate increases based on loan volume. For example, 1% on the first $1 million in loan volume, 1.25% on volume between $1 million and $2 million, and 1.5% over $2 million.

• Split rate commission – This model pays a lower rate on the loan amount and a higher rate on the loan fees. For example, 0.5% of the loan amount and 3% of the fees.

• Hybrid models – Some brokerages use a hybrid approach, such as a flat 1% on conforming loans but a tiered structure on jumbo loans.

Within any model, there is often a limit on the maximum dollar amount a loan officer can earn per loan. This helps manage the brokerage’s commission expenses.

Factors That Impact Commission Rates

Several factors influence what commission percentage a loan officer might receive

• Type of loans originated – Conforming loans that can be sold to government-sponsored enterprises like Fannie Mae and Freddie Mac often pay lower commissions given their lower risk. Jumbo loans and niche products tend to pay higher rates.

• Loan officer experience – Top producing loan officers with a strong track record can often negotiate higher payouts. Newer loan officers tend to start at lower commission tiers.

• Geographic location – Commission rates can vary based on the local housing market. Rates tend to be higher in competitive markets where loan officers have more options.

• Lending channel – Retail loan officers may earn higher commissions than call center loan officers. Independent brokerages also tend to pay more than banks.

• Brokerage commission structure – Each company sets their own commission plan based on overhead costs and other factors. Brokerages may adjust rates to attract talent.

Average Commission Rates and Earnings

While commission structures vary, we can look at industry averages to get a sense of typical payouts:

• Conforming loans – For most conforming loans, commission rates range from 0.5% to 1.25% depending on market and lender. 1% is a common baseline.

• Jumbo and niche loans – Commission rates on jumbos and specialty products like VA and FHA loans range from 1% to 2%. Top producers can sometimes negotiate even higher.

• Average earnings – According to data from the Bureau of Labor Statistics, the average annual commission for a loan officer is $60,570 representing about 75% of total compensation. Top earners often make over $100,000.

• Per loan earnings – Based on average loan amounts and commission rates, loan officers can expect to earn $2,500 to $7,500+ per closed loan depending on loan size and commission structure.

• Monthly earnings – With steady loan volume, it’s possible for loan officers to earn $10,000 or more per month in commissions. Those originating over $5 million per month in loan volume can earn $50,000+ monthly.

Earning Potential for Top Loan Officers

The very best loan officers originate a high volume of loans and can negotiate favorable commission arrangements approaching 2% or more. This creates significant earning potential:

• Originating $3 million in loan volume per month at 1.5% would generate $45,000 in monthly commissions.

• At a 2% commission rate, a loan officer generating $5 million per month would earn $100,000 monthly or $1.2 million annually.

• On a single $1 million loan, a 2% commission would result in earnings of $20,000. Closing two loans of that size per month would mean $40,000 in monthly commissions.

• A loan officer closing $10 million in jumbo loans in a year at 1.75% commission would make $175,000 that year just from those loans.

With the right combination of sales skills and work ethic, six-figure incomes are achievable for successful mortgage loan officers. Originating just 20-25 loans per month can deliver a very healthy income at commission rates of 1-2%. This makes loan officer commissions lucrative for those able to consistently generate business.

How Much Do Loan Officers Make in Salary?

In addition to commissions, many loan officers also earn a base salary from their employer. According to the Bureau of Labor Statistics, the average base pay for a loan officer is $21,720 annually. However, base salaries can vary significantly.

Here are some salary ranges based on experience and job setting:

• Entry-level retail loan officers – $30,000 – $45,000 base salary

• Experienced retail loan officers – $40,000 – $75,000 base

• Call center loan officers – $35,000 – $55,000 range

• Commercial/business lending officers – $50,000 – $80,000

• Mortgage broker owners – May choose to take $100,000+ in base salary in lieu of commissions

For many loan officers, salary makes up about 25% of total compensation with commissions comprising the bulk of their earnings. However, some prefer to take a lower base salary to maximize commission payouts.

The Bottom Line

Being a loan officer provides the opportunity to earn significant income through commissions based on originated loan volume. Although commission structures vary, rates of 1-2% are common. For those able to consistently originate millions per month in mortgages, six-figure incomes are achievable. While demanding, a loan officer career offers the potential for high earnings for those willing to put in the work.