When going through the home buying process, most people will work with a mortgage loan officer. These professionals help potential homebuyers navigate the complex world of mortgage loans and ultimately secure financing. But how exactly are mortgage loan officers compensated for their services? Here is an in-depth look at the most common ways these essential housing experts get paid.
Salary
Some mortgage loan officers receive a set annual salary from their employer. This provides a steady predictable income regardless of how many clients they work with or loans they close.
Salary levels for loan officers vary based on:
- Experience and skills
- Education and training
- Geographic location
- Employer (bank, credit union, mortgage company, etc.)
According to the US Bureau of Labor Statistics, the average annual salary for a loan officer is around $63,000. However, it can range from $40,000 for entry-level positions to over $100,000 for highly experienced loan officers working for large banks and lenders.
The main advantage of being salaried is stability in income. The drawback is loan officers paid this way may lack incentives to go above and beyond for clients.
Hourly Wages
Some junior loan officers or those in training start out earning hourly wages until they build skills and transition to salary or commission. Hourly pay provides regular income and may include opportunities for overtime pay.
According to PayScale, the average hourly rate for a mortgage loan officer is $23, though rates from $15-$35 per hour are common. Pay rates depend on location, experience, employer and other factors.
Commission
Many mortgage loan officers earn money through commissions – typically a percentage of each loan amount they originate. This gives them a financial incentive to provide excellent service and close more loans.
Commission rates often follow a tiered structure based on loan volume:
- Tier 1: 50 basis points (0.5%) on the first $5 million of loans closed
- Tier 2: 75 bps (0.75%) on loan volume between $5M – $10M
- Tier 3: 100 bps (1%) on loan volume exceeding $10M
So for example, if a loan officer closes $6 million in loans in a month, they would earn:
- 50 bps on the first $5M = $25,000
- 75 bps on the remaining $1M = $7,500
For a monthly commission total of $32,500.
Commission structures reward productivity and incentivize loan officers to provide an exceptional client experience throughout the lending process.
Bonuses
On top of salary and/or commissions, loan officers often earn bonuses based on performance goals and benchmarks such as:
- Loan volume targets – Bonuses for reaching set mortgage origination goals
- Customer satisfaction – Rewards for earning positive client reviews and feedback
- Quick closings – Extra pay for shortening loan processing times
- Referrals – Bonuses for client referrals that lead to new business
Bonuses are usually paid out on a quarterly or annual basis. They enable loan officers to significantly boost their overall compensation through stellar service.
Origination Fees
In addition to receiving a salary, commissions or bonuses from their employer, loan officers may also collect origination fees directly from borrowers.
Origination fees are typically 1% of the total mortgage loan amount. They cover the administrative costs of processing the loan and compensate the officer for their expertise.
Borrowers can negotiate origination fees, so it pays to shop around and compare options.
The Hybrid Approach
Given the pros and cons of salary vs. commission pay structures, many lenders use a hybrid approach:
- Base salary – Provides a reliable weekly or monthly income
- Commission – Rewards productivity by paying a % of loans closed
- Bonuses – Incentives to meet key performance indicators
This allows mortgage loan officers to earn a steady wage along with uncapped commission potential through exceptional service.
The specific compensation mix varies by employer. Some pay a lower salary with higher commission rates, while others prioritize base pay over commissions.
No matter how they are paid, the best loan officers are focused on helping clients get affordable home financing, not just earning the highest pay. Keep this in mind when choosing a mortgage pro to work with.
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Mortgage Loan Officer Earning Potential
Your earning potential as a Mortgage Loan Officer can increase as you gain experience and develop your career with additional education. Other factors that will impact your earnings as an MLO include the state in which you do business and the fluctuation of the mortgage market. A whopping 36% of full-time MLOs make above the national average salary, earning up to $181,000 per year.
With unlimited earning potential and the chance to gain experience and education as you go, becoming a Mortgage Loan Officer can unlock a lucrative and stable career path.
Payment Structure for MLOs
Mortgage Loan Officers make their money through loan origination fees, closing costs, and servicing and selling loans. Most often, a Mortgage Loan Officer’s salary is based on commission, with compensation varying from office to office and state to state. This fee is built into the mortgage interest rate as a percentage of the loan amount. With a higher interest rate, MLOs can expect higher compensation and vice versa. Their pay also depends on the number of loans they originate and the percentage of commission they’ve negotiated.
Some Mortgage Loan Officers are paid on commission only, which is common for smaller, state-licensed Mortgage Brokers. If an MLO is hired by a bank or larger financial institution, they are often given a base salary as well as commission and benefits. Some brokerages have a limit on the dollar amount an MLO can make from a single loan, and this figure can be negotiated alongside the commission fee.
Mortgage Loan Officers are either paid “on the front” or “on the back” of the loan. When an MLO is paid “on the front”, the borrower is charged certain fees, such as settlement costs, and that money is given to the MLO. These fees are paid by the borrower either out of pocket or are incorporated into the loan. This payment structure is also called borrower-paid compensation. If MLOs are making money “on the back”, otherwise known as lender-paid compensation, then their commission comes from the bank that is selling the loan to the borrower. This charge is not seen by the borrower. When an MLO is paid “on the back”, they may market themselves and their loans as having “no out-of-pocket fees” or “no-fees”. The Mortgage Loan Officer is still making money, but it is charged on the back-end of the transaction. It’s important to note that an MLO is either paid by the lender or the borrower, but never both.
The typical MLO is paid 1% of the loan amount in commission. On a $500,000 loan, a commission of $5,000 is paid to the brokerage, and the MLO will receive the percentage they have negotiated. If the portion of the commission for the MLO is 80%, they will receive $4,000 of the $5,000 brokerage percentage fee. Depending on the MLO’s involvement in the transaction, the percentage fee can range anywhere from 20-80%.
Whether you’re a commission-based or salaried MLO, you’ll find that more experience and education will land you a higher income. So, what is the earning potential of a Mortgage Loan Officer?
How Are Mortgage Loan Officers Paid? (MORTGAGE BANKER Explains)
FAQ
How do you make money as a mortgage loan officer?
Why do mortgage loan officers make so much money?
Is being an MLO worth it?
Do loan officers make more money on higher interest rates?
Does a mortgage loan officer make money?
The Mortgage Loan Officer is still making money, but it is charged on the back-end of the transaction. It’s important to note that an MLO is either paid by the lender or the borrower, but never both. The typical MLO is paid 1% of the loan amount in commission.
How much does a loan officer make?
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.
Is a mortgage loan officer paid on the back?
When an MLO is paid “on the back”, they may market themselves and their loans as having “no out-of-pocket fees” or “no-fees”. The Mortgage Loan Officer is still making money, but it is charged on the back-end of the transaction. It’s important to note that an MLO is either paid by the lender or the borrower, but never both.
How do banks pay loan officers?
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.
Who pays the MLO on a home loan?
It’s important to note that an MLO is either paid by the lender or the borrower, but never both. The typical MLO is paid 1% of the loan amount in commission. On a $500,000 loan, a commission of $5,000 is paid to the brokerage, and the MLO will receive the percentage they have negotiated.
What companies pay a mortgage loan officer?
Below is the total pay for the top 10 highest paying companies for a Mortgage Loan Officer in United States. Employers include Homebridge Financial Services, RP Funding and Paramount Residential Mortgage Group. What are total pay estimates for a Mortgage Loan Officer at different companies? Is this salary info helpful? Let’s pay it forward!