Being a loan officer at a mortgage broker is different from being a loan officer at a mortgage lender. Each can differ significantly in terms of their roles, responsibilities, and operations. Here’s a breakdown of the primary differences:
Mortgage Broker: Act as intermediaries between borrowers and lenders. They do not lend money directly but rather help borrowers find the best loan options for them by shopping their loan application around to multiple lenders or leveraging an online mortgage marketplace, among other tools.
Mortgage Lender: Directly lend money to borrowers. Loan officers at a mortgage lender work for the lending institution and offer only the loan products that the institution provides.
Mortgage Broker: Typically have access to a wide range of loan products from multiple lenders. This allows them to tailor loans to the borrower’s specific needs and circumstances.
Mortgage Lender: Offer only the loan products that their institution has. Their product range might be limited compared to brokers.
Mortgage Broker: Their compensation typically comes directly from the lender in the form of a commission percentage.
Mortgage Lender: Loan officers at a mortgage lender might receive a base salary plus commissions or bonuses based on the volume or value of loans they originate.
When applying for a mortgage, you have two main options – working with a mortgage broker or going directly to a loan officer at a bank Both can help you through the mortgage process, but there are some key differences between the two roles One major factor to consider is how mortgage brokers and loan officers get paid. Their compensation structures are quite different, which impacts the salary potential for each position.
In this article we’ll break down the typical earnings and pay structures for mortgage brokers vs loan officers. Read on to learn which career pays more on average and may be the better option for you.
How Mortgage Brokers Get Paid
Mortgage brokers are independent loan originators who can broker mortgages from many different lending institutions. They are not employees of any particular bank or lender. Their job is to take a borrower’s application and shop it around to various banks and lenders to find the best rates and loan programs.
Mortgage brokers earn money through commissions and fees paid by the borrowers and/or lenders when the loan closes. There are a few common compensation models:
- Upfront origination fee paid by the borrower
- Commission from the lender upon closing
- Combination of origination fee and commission
On average, mortgage broker commissions range from 0.5% to 2% of the loan amount. So on a $300,000 mortgage, they may earn $1,500 to $6,000. Many also charge upfront origination fees of 1% to 3% of the loan amount.
Some key advantages of being a mortgage broker include:
- Ability to work independently
- Flexible schedule
- Unlimited earning potential
- Opportunity to make money even if a loan doesn’t close
One downside is that mortgage brokers’ income fluctuates depending on market conditions and interest rates. When rates rise, there tend to be fewer people refinancing, which can mean fewer deals and lower commissions.
How Loan Officers Get Paid
Loan officers work directly as employees for banks and mortgage lenders. They can only offer loan products from their particular institution.
Unlike brokers who work on commission, loan officers typically earn a base salary plus bonuses/commissions on closed loans. According to the Bureau of Labor Statistics, the average base pay for a loan officer is approximately $63,000 per year.
On top of their base salary, loan officers also earn commission based on:
- Dollar amount of loans funded
- Number of loans closed
- Customer satisfaction scores
Commissions often range from 0.25% to 1% of the loan amount. Additional bonuses may be paid out depending on volume and performance goals set by the lender.
The main advantages of being a loan officer include:
- Steady base salary
- Potential to earn bonuses and commissions on top of base
- May qualify for employee benefits like healthcare, 401k, etc.
Downsides can include cap on commissions, extensive sales goals set by the lender, and lack of flexibility compared to being an independent broker.
Comparing Overall Earning Potential
When looking at typical earnings, on average, mortgage brokers have the potential to earn more than loan officers.
According to the BLS, the median annual pay for loan officers was $63,960 in 2021. The top 10% earned above $141,930 per year.
For mortgage brokers, total compensation depends heavily on commissions, fees, and overall loan volume. Top producing brokers can earn well into six figures. The top 10% of brokers earn $250,000 or more per year.
Mortgage brokers also have uncapped earning potential based on the number of deals they can close. Loan officers’ earnings may be limited by a lower capped commission rate and corporate sales goals.
However, it’s important to note that as an independent broker, mortgage brokers also experience much higher income variability than loan officers who earn a salary. During slow markets or rising rate environments, brokers may close fewer deals.
Loan officers generally earn a consistent base paycheck regardless of market fluctuations. Their commissioned earnings potential is lower than brokers, but more stable when combined with salary.
Key Factors Impacting Mortgage Salaries
When evaluating the earning potential between being a mortgage broker vs loan officer, here are some key factors to consider:
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Experience level – For both brokers and loan officers, earnings tend to increase with time in the business. It takes time to build a book of repeat customers and referral sources. Rookies generally earn up to 20% less than seasoned pros.
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Education – Advanced degrees and professional certifications can boost earning power. Loan officers may need to meet education requirements set by their employer. Brokers can also command higher fees and commissions with designations like Certified Mortgage Planner.
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Reputation – Highly regarded brokers and loan officers develop strong referral networks over time. More customer and realtor referrals generally translate to higher income potential.
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Loan volume – The number of loans originated has a direct impact on potential earnings. Brokers and loan officers who close more loans and greater loan amounts get paid more.
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Efficiency – Reducing fallout and pulling through a high percentage of loan applications also improves earning capacity. The more deals that make it to close, the more brokers and officers get paid.
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Work arrangements – Some loan officers and brokers work as employee teams, resulting in revenue sharing that may limit individual earnings. Independent brokers have no revenue sharing caps.
Should You Become a Mortgage Broker or Loan Officer?
Deciding between a career as a mortgage broker vs loan officer depends largely on your financial goals and ideal work style.
If you’re highly sales driven and want to maximize your income potential, becoming an independent mortgage broker may be the better route. You’ll retain 100% of your commissions without salary caps. This career path allows the flexibility to work for yourself and be your own boss.
For those who value job security, benefits, and steady salary, a loan officer role with a bank may be preferable. While total earnings may be lower than top producing brokers, base salary provides income stability during market fluctuations.
Whichever path you choose, be prepared to put in the work building your reputation and referral network. It takes 1-3 years for most new mortgage professionals to build up their book of business. But once established, both brokers and loan officers have the potential for six-figure incomes and high job satisfaction guiding borrowers through one of life’s biggest financial decisions.
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Approval and Underwriting Process
Mortgage Broker: Once a suitable lender is found for a borrower’s needs, the loan application is sent to that lender for approval and underwriting. The broker may have specialists that assist with the processing and fulfillment of the loan.
Mortgage Lender: The process is typically in-house. The loan officer works closely with underwriters.
Mortgage Broker: Often have a closer, more personal relationship with borrowers since they work closely with them to find the best loan option. The relationship is usually more consultative and tailored to the borrower’s needs.
Mortgage Lender: The relationship is direct, but it might be more transactional in nature, especially if the lending institution is larger.
Mortgage Broker: Must be licensed to operate, with requirements varying by state. The licensing often requires coursework and exams.
Mortgage Lender: Loan officers must also be licensed, but the emphasis might be more on the specific products and processes of the lending institution.
Mortgage Broker: Usually operates with more independence. They have the flexibility to choose from a range of lenders and products based on what’s best for the client.
Mortgage Lender: There’s typically less flexibility since loan officers are bound by the products and policies of their institution.
Both of these roles play essential parts in the mortgage industry. Choosing between being a loan officer at a broker or a lender will depend on individual preferences, career goals, and the desired working environment.
If you’re looking to become a loan officer at an online mortgage broker, Morty makes it quick and easy to get sponsored and work off our platform. This allows you to leverage our lender marketplace, tech, and support from our processing and fulfillment teams.
Mortgage Loan Officer Q&A- Salary, Hours, Costs, and more (The HONEST TRUTH)
FAQ
Is a broker the same as a loan officer?
Why do mortgage loan officers make so much money?
Why is a mortgage banker better than a mortgage broker?
Do mortgage brokers make more than loan officers?
Mortgage brokers tend to earn higher salaries than loan officers, although that varies by location and years of experience. Mortgage brokers connect borrowers with lenders. They are typically paid 1% to 2% of the loan amount by either the borrower or the lender.
How do mortgage brokers get paid?
How they get paid. Loan officers are employees of the lender, while mortgage brokers are independent of the mortgage company. The loan officer generally receives a salary, commission or a combination of the two. Mortgage brokers receive compensation from the borrower, the lender or both.
How much do mortgage loan officers make?
For example, as of April 2023, Payscale reports an average base salary of $49,369 for mortgage loan officers vs. $58,304 for brokers. Similarly, Glassdoor reports an average base salary of $154,275 for mortgage loan officers vs. $136,620 for brokers.
What’s the difference between a broker and a loan officer?
Brokers may also be able to waive application and origination fees, while loan officers typically aren’t able to waive any fees directly. While the role of a broker includes searching for mortgages on behalf of their clients to find the best available deal, they don’t lend money directly, unlike loan officers.