Becoming a mortgage loan originator can be a lucrative career path. But how much do these professionals actually make per loan they originate? In this article, we’ll break down the typical commission structures and income potential for mortgage loan originators.
What Does a Mortgage Loan Originator Do?
First let’s review the role of a mortgage loan originator. These professionals work directly with borrowers to help them go through the home buying and mortgage lending process. Their main responsibilities include
- Meeting with prospective borrowers to understand their financial situation and goals
- Collecting documentation and information needed for the mortgage application
- Guiding borrowers through the options to find the best mortgage product for their needs
- Compiling completed mortgage applications to submit to underwriters
- Serving as the main contact for borrowers throughout the lending process
- Ensuring mortgage loans close properly by coordinating with all parties involved
In essence, mortgage loan originators are sales professionals who match home buyers with mortgage products from banks and lenders. They often work for banks, mortgage companies, or independently as brokers. Their income comes mainly from commissions earned on the loans they help originate.
Commission Structures for Mortgage Loan Originators
Most mortgage loan originators earn money through commissions paid on closed loans. The commission structures can vary, but there are two main models:
Percentage of Loan Amount
One popular structure pays the loan originator a percentage of the mortgage loan amount at closing Typical commission rates are
- 0.5% to 1.5% for conforming loans under the conforming loan limit set by the FHFA. For 2023, this limit is $726,200.
- 1.75% to 2.75% for jumbo loans exceeding conforming limits
For example, on a $300,000 conforming loan with a 1% commission rate, the loan originator would earn $3,000. On a $1 million jumbo loan at 2.5%, they would earn $25,000.
Flat Fee Per Loan
Some companies pay a flat fee per funded loan instead of a percentage. This fee can range from $1,500 to $5,000+ per loan, depending on the lender and market.
Flat fees allow loan originators to earn decent commissions on lower balance loans. But commissions on larger loans may be lower than the percentage model.
Factors That Impact Mortgage Loan Originator Commission
Several factors can influence how much a mortgage loan originator earns per individual loan:
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Experience level – More experienced originators often earn higher commission rates. New loan officers may start between 0.5% to 1%.
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Loan type – Government-backed loans usually have lower commissions than conventional loans. Jumbo and niche loans can pay higher commissions.
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Loan volume – Producing more loan volume provides scale and can unlock higher payouts.
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Geographic location – Commission rates tend to be higher in more competitive, higher cost markets.
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Lender pay structure – Some lenders incentivize volume with tiered commission rates.
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Repeat/referral business – Many lenders provide commission bonuses for repeat or referred customers.
Estimating Potential Yearly Income
Given the commission structures above, mortgage loan originators can potentially earn quite high incomes. However, their annual earnings depend heavily on loan volume and originator productivity.
As a rough guideline, the average mortgage loan originator likely closes between 15 to 30 loans per month. However, top producers can fund 50+ loans per month during busy times.
Here are some sample income scenarios based on commission rates and monthly loan volume:
- 15 loans per month at 1% commission: $27,000 ($300k average loan) to $54,000 ($600k average loan)
- 25 loans per month at 1.5% commission: $112,500 ($300k average loan) to $225,000 ($600k average loan)
- 40 loans per month at 2% commission: $288,000 ($300k average loan) to $576,000 ($600k average loan)
As you can see, mortgage loan originators can earn anywhere from around $100,000 for newer professionals up to over $500,000+ per year for highly productive top earners. Location and local home prices also greatly impact earning potential.
Key Takeaways
To recap the key points:
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Mortgage loan originators earn commissions on the loans they help originate. This serves as the majority of their income.
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Typical commission structures include either a percentage of the loan amount (0.5% to 2.75%) or a flat fee per loan ($1,500 to $5,000+).
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Commission rates and annual income depend on loan volume, experience level, loan types, and other factors.
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On average, most loan officers close between 15 to 30 loans per month. Top producers may fund over 50 loans monthly.
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Given typical commission rates and productivity levels, mortgage loan originators can earn anywhere from around $100,000 to over $500,000 per year.
Origination commissions provide attractive earning potential for loan officers willing to put in the hard work of high sales productivity. But commission income also fluctuates based on mortgage market conditions. Overall, mortgage origination remains a rewarding career path for sales-minded finance professionals.
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.