Mortgage loan officers play a key role in the home buying process. They meet with prospective homebuyers assess their financial situations pre-approve them for loans, and guide them through the mortgage application process. With their expertise, mortgage loan officers help match homebuyers with the right loan products so they can achieve homeownership.
But how exactly do mortgage loan officers get paid for their services? This is an important question for consumers to understand, as a loan officer’s compensation structure could potentially influence the types of loans and terms they recommend.
In this comprehensive guide, we’ll break down the common pay structures for mortgage loan officers, the factors that impact their earnings, and what borrowers should know about how loan officers make money.
The Basic Payment Structures
Most mortgage loan officers earn their income through commissions based on the loans they originate. Their commission rates and payment structures depend on the type of mortgage lender they work for. The two main models are:
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Mortgage banks/brokers Loan officers typically earn commissions based on a percentage of the total fees and interest yield from each loan they close. For example if a loan officer closes a mortgage that generates $5000 in total revenue for the lender, and their commission rate is 80%, they would earn $4,000.
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Banks/credit unions Loan officers often receive a lower base salary plus smaller commissions based on loan volume rather than total revenue For instance, they may earn 025% of each loan amount they originate. On a $200,000 mortgage, this would equal a $500 commission.
Some loan officers may also receive bonuses and incentives based on performance goals for total loan volume, customer satisfaction metrics, or other objectives.
Factors That Impact Earnings
Mortgage loan officer commissions can vary widely depending on:
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The lender: Compensation structures differ across mortgage banks, brokers, banks, and credit unions.
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Experience level: Seasoned loan officers usually have higher commission rates.
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Loan type: Loans with higher interest rates or more closing costs may have higher commissions.
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Loan amount: Commissions based on a percentage of the loan amount mean higher payouts on bigger mortgages.
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Market conditions: Commissions tend to rise when interest rates fall, spurring higher loan demand.
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Performance: Top producers can earn bonuses and incentives beyond their regular commissions.
Overall compensation packages also include benefits like health insurance, retirement plans, and paid time off.
What Borrowers Should Know
While commissions give loan officers an incentive to close more loans, some compensation models can potentially create conflicts of interest. Here are tips for consumers:
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Ask upfront how your loan officer is paid and determine if it’s commission-based.
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Be wary of commissioned loan officers pushing you to accept higher interest rates or fees.
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Compare loan estimates from multiple lenders to identify inconsistencies.
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Focus on total costs — not just interest rates — when evaluating loan offers.
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Consider banks/credit unions where loan officers earn salaries if you want fee consistency.
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Opt for lenders that align loan officer commissions with customer best interests.
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Know that you have options and can say no if a loan product seems mismatched for your needs.
The Bottom Line
Most mortgage loan officers work on commission, earning income based on the number and size of loans they originate. While commissions give loan officers motivation to close more deals, some compensation models can lead to conflicts of interest. As a borrower, it pays to understand how loan officers make money so you can be an informed consumer and find the right mortgage professional for your home buying needs. With knowledge and vigilance, consumers can benefit from the expertise of commissioned loan officers while still protecting their own financial interests.
Frequency of Entities:
- Mortgage loan officers: 20
- Loan officers: 15
- Mortgage lenders: 5
- Mortgage banks: 3
- Mortgage brokers: 3
- Banks: 3
- Credit unions: 3
- Commissions: 7
- Interest rates: 2
- Fees: 4
- Loan amount: 3
- Loan volume: 2
- Performance: 2
- Borrowers: 5
- Consumers: 3
- Lenders: 2
- Loans: 15
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 Loan Officers Make Money? Comp plans, BPS, rate sheets, and salaries?
FAQ
How do you make money as a mortgage loan officer?
Why do mortgage loan officers make so much money?
Do loan officers make more money on higher interest rates?
How does a mortgage lender make money?
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.
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.
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.
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.
How does a mortgage broker get paid?
A mortgage broker’s total compensation can be paid through various means, including cash or an addition to the loan balance. If a borrower pays the broker, they will do so at closing. However, if a lender pays, this fee is sometimes rolled into the loan cost, meaning the borrower may still be on the hook.