Finding the right mortgage can be a complicated process. As a borrower, you want to get the lowest interest rate and best loan terms. But how do mortgage professionals like loan officers get paid? Do they earn a commission based on the loans they originate?
The short answer is yes many loan officers do make money from commissions. However, the details of their compensation models can vary quite a bit between different companies and business models.
The Main Ways Loan Officers Get Paid
There are three primary compensation structures for loan officers:
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Salary only Some loan officers receive a flat salary not tied to loan volume, This is more common with bank-employed loan officers
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Salary plus commission: Many loan officers get a base salary plus commissions based on the dollar amount of loans closed. This model incentivizes loan volume.
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Commission only: Most mortgage brokers and some bank loan officers get paid entirely by commissions. Their pay is directly tied to loan volume and fees.
Within these frameworks there is a lot of variability in commission rates, bonus opportunities, and how origination points and lender fees factor in.
Commission Rates and Bonuses
For commission-based loan officers, their commission percentage often falls somewhere between 50 to 100 basis points (0.5% to 1.0%) of the loan amount. On a $300,000 mortgage, that would equate to $1,500 to $3,000 in commission.
Many lenders also offer tiered commission rates based on loan volume thresholds. The more loans and dollar volume a loan officer closes the higher their commission rate applies.
Bonuses are common too. Some companies pay extra bonuses for exceeding volume and revenue goals or closing loans within certain time frames. There are also often bonuses for originating specific products like VA, FHA, or jumbo loans which may require extra work.
Origination Fees and Points
In addition to commissions tied to the loan amount, loan officers can also generate revenue from origination fees and points paid by the borrower.
Origination fees are usually around 1% of the loan amount. Points are prepaid interest that can lower the interest rate, with each point equal to 1% of the loan amount.
On a $300,000 purchase loan, a 1% origination fee would be $3,000 and a single point would be $3,000. Many lenders allow the loan officer to keep some or all of these charges as part of their commission.
So on top of the commission, a loan officer could hypothetically earn $4,500 or more in fees from a $300,000 loan.
How Commission Structures Incentivize Loan Officers
Clearly, commission-based compensation gives loan officers a strong financial incentive to close as many loans as possible and charge higher fees. Some pros and cons of this model from the borrower’s perspective:
Pros
- Loan officers motivated to close your loan quickly
- May find you a better deal to win your business
Cons
- Could push you into a bigger loan than you need
- May not present options with lower fees/costs to them
To get the best deal as a borrower, it helps to understand these incentives when shopping for mortgage rates and interacting with loan officers.
Differences Between Mortgage Brokers, Banks, and Credit Unions
Mortgage brokers, banks, and credit unions take different approaches to loan officer commissions:
Mortgage Brokers
- Almost always commission-based pay
- Can earn origination fees and points in addition to commissions
- Flexibility to work with multiple wholesale lenders
Big Banks
- Salary plus commissions more common
- Lower commissions but steady base pay
- Typically only sell their own loan products
Credit Unions
- More likely to be salaried with lower commissions
- Origination fees less common
- Usually the lowest rates and fees overall
While generalizations, these trends in compensation structures impact the experience borrowers have getting a mortgage from different types of lenders.
Tips for Finding a Loan Officer Incentivized to Help You
As a borrower, a commission-focused loan officer isn’t necessarily bad. You just need to align their incentives with your own goals. Here are some tips:
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Ask up front how the loan officer gets paid and what they personally make from your loan
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Get multiple loan estimates to compare options and fees
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Be open to lenders and networks the loan officer recommends
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Avoid extra fees you don’t fully understand
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Ask for discounts if you have a relationship with the lender
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Supply documents and information promptly to help them close faster
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Comparison shop rates often to find the best deal
Finding a loan officer that earns your trust is just as important as the lender they work for. Understanding commission structures helps align your priorities for getting the mortgage deal that best fits your needs.
How Much Do Mortgage Loan Officers Make?
According to ZipRecruiter, Mortgage Loan Officer salaries below $50,000 (25th percentile) and above $200,000 (90th percentile) are outliers. The majority of MLOs (24%) make between $81,500 and $102,499.
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%.
While some Mortgage Loan Officers are paid commission by percentages, others are paid by basis points. The Mortgage Reports says, “Each basis point is 1/100th of one percent, so 25 basis points, or bps, equals 1/4 of one percent. That’s $250 for a $100,000 mortgage.”
If you’re entering the industry and don’t know where to start regarding a compensation plan, check out this sample.
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. Around 16% 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.
How Do Mortgage Loan Officers Make Money?
The way that Mortgage Loan Officers are paid will vary from office to office, depending on commission structure, fee splits, salary, bonuses, and benefits. If an MLO works for a financial institution, like a bank, they are more likely to be paid a salary and receive benefits. MLOs working for a state-licensed mortgage brokerage will most likely earn commission.
How Loan Officers Make Money? Comp plans, BPS, rate sheets, and salaries?
FAQ
Where does a loan officers commission come from?
Are loan officers salespeople?
How does MLO make money?
Do bankers get commission on loans?
How is a loan officer’s commission calculated?
If the loan officer is paid a flat fee per loan, then the commission is simply the predetermined amount. If the loan officer is paid a percentage of the loan amount, then the commission is calculated by multiplying the loan amount by the predetermined percentage. For example, a $500,000 loan at a 2% commission rate will be paid out at $10,000
How much Commission can a loan officer make?
As a sales-based role, the general rule is that you can make more commissions in situations in which you’re generating your own leads. The difference can range from 0.2% to 2% of the total loan amount, again depending on the employer. Additionally, loan officers can earn incentives for reaching certain thresholds or selling certain products.
How do mortgage loan officers get paid?
Mortgage loan officers may be paid entirely on commission, a combination of salary and commission, or a salary. Bonuses or incentives may also be paid out. Their pay is usually incentivized by how good they are at closing home mortgage loans. Mortgage loan officers have high earning potential. As noted previously, compensation can exceed $200,000.
Does a Bank pay a loan officer a commission?
Although the bank is paying the loan officer a commission, the money is really coming from you, the borrower, in the form of a higher annual percentage rate (APR) to make up for lost fees. In fact, the lending institution could be making a lot more money this way, as it stands to get a higher interest rate for what could be 30 years or more.