Are you curious about how much the average loan officer makes in commission? Are you a mortgage broker looking to maximize your revenue?
This article will provide an in-depth look at loan officer compensation so that you can make informed decisions about your business.
Becoming a mortgage loan officer can be an attractive career path for many reasons. Loan officers get to help homebuyers achieve their dream of owning a home while earning a good living for themselves. But how exactly are mortgage loan officers compensated? What does the typical commission structure look like in this field? In this article, we’ll break down the various components that make up a loan officer’s pay.
Commission-Based Pay is Common
The most common pay structure for mortgage loan officers is commission-based. This means that their earnings are directly tied to their performance and the number and size of loans they are able to close. Usually, loan officers earn a percentage of the total loan amount for each mortgage they originate. Commission rates often range from 0.5% to 1% of the loan value.
So for a $200,000 mortgage, the loan officer may earn $1,000 to $2,000 in commission. The higher the loan amount, the bigger the commission. This incentivizes loan officers to take on more clients and larger loans. Many earn six-figure incomes by closing a high volume of mortgages each month.
Factors That Influence Commission Rates
However, commission rates can vary substantially based on several factors:
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Experience level: More seasoned loan officers tend to earn higher commission rates.
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Performance: Top performers are often rewarded with higher payouts.
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Loan type: Government-backed loans like FHA and VA loans tend to pay less than conventional mortgages.
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Products sold Additional products like title insurance can add to the commission
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Lender: Each company sets its own commission schedule.
So an experienced loan officer closing conventional mortgages may earn 15% commission, while a rookie mainly doing FHA loans may only get 075%.
Salary Potential
While commission serves as the main source of income, some loan officers do receive a base salary from their employer. This provides a predictable paycheck to cover basic expenses. The salary often ranges from $30,000 to $60,000.
For loan officers at banks and credit unions, salary makes up a larger portion of the total compensation. Base salaries at big banks can reach up to $90,000 for high performers. But for dedicated mortgage lenders, commission accounts for the bulk of earnings.
Bonuses and Incentives Add Up
On top of commission and base salary, loan officers can qualify for bonuses and incentives. For example, some lenders offer a signing bonus of $5,000+ for new loan officers who join their team. There are also monetary rewards for reaching certain sales volumes or customer satisfaction levels.
Payouts for referrals are common too. If a loan officer refers a real estate agent who provides multiple clients, they may get 25% of the agent’s commission. Some even participate in company profit sharing plans. These extras enhance the loan officer’s overall pay.
Origination Fees From Borrowers
Another source of income for loan officers is origination fees charged to borrowers. This fee covers the work of processing the mortgage application and can range from 0 to 2% of the loan amount based on lender policy. On a $500,000 mortgage, a 1% origination fee would amount to $5,000 collected from the borrower’s closing costs.
However, origination fees are not pure profit. Much of it goes towards covering the loan officer’s own expenses. But it does contribute to their bottom line.
Costs That Eat Into Earnings
While loan officers have multiple income streams, their take-home pay is reduced by overhead expenses. As commission-based salespeople, loan officers typically pay for their own benefits, taxes, licenses, insurance, marketing, travel, and other costs.
These can add up to 30-50% of revenue. So out of a $10,000 commission check, $3,000 to $5,000 may go back out for expenses. Still, disciplined loan officers can earn very well despite the costs.
The Potential for High Earnings
With the right lender, experience, and sales volume, it’s possible for mortgage loan officers to earn $150,000 or more in total compensation. However, just like any commission-focused role, income varies based on performance. During slow markets, commissions may dip.
But over time, high performing loan officers can build a book of recurring clients and referral partners to create stable production even when mortgage activity declines. This helps maintain healthy earnings no matter the economic conditions.
Should You Become a Loan Officer?
If you enjoy networking, sales, and helping homebuyers, a career as a mortgage loan officer can be financially and personally rewarding. But make sure you understand the commission structure and have a solid marketing plan before jumping in.
The uncapped earning potential provides ample motivation. However, the first few years require hustle and discipline before commissions really build up. Do your homework before leaving your steady salaried job. The hard work as a new loan officer pays off down the road.
Examples of Loan Officer Compensation Plans
Loan officer compensation plans vary widely, so its important to understand the different options available. Here are some examples of loan officer compensation plans:
- Flat fee per loan: The loan officer receives a predetermined amount of money for each loan they close.
- Percentage of loan amount: The loan officer receives a percentage or basis points according to the loan amount, so the commission rate is higher for larger loans.
- Bonus for closing more loans: Some loan officers may receive a bonus if they are able to close more loans in a given period of time.
- Hybrid commission structure: Some loan officers may receive a combination of a flat fee per loan and a percentage of the loan amount.
Understanding how much loan officers make in commission is an important part of running a successful mortgage brokerage. Loan officer compensation can vary widely, depending on the type of loan, the terms of the loan, and the loan officers commission structure.
The Loan Originator Compensation Rule (LOCR) is a federal rule that governs how loan officers are compensated. The rule requires that loan officers be compensated in a “reasonable and customary” manner and that their compensation must not be tied to the terms of the loan.
Understanding your average compensation rate and average loan size can greatly help you as you scale your mortgage brokerage. Our team works with many brokers and independent loan officers to understand and predict the ever-changing market and navigate uncharted territory.
Grow your brokerage with an accountant and financial coach at Amarlo today!
How Much Does a Loan Officer Make Per Loan?
The short answer to this question is that it depends.
Loan officer compensation varies widely depending on the loan type, the loan terms, and the loan officers commission structure. There are two common commission structures:
- A flat fee per loan
- A percentage (or basis points) of the loan amount.
Some brokerages work with loan officers on a contractor basis and charge a flat broker fee. The loan officer can price the loans theyre originating (on average, around 2% of the loan amount), and the broker receives a flat fee in exchange for their support. They issue a 1099 to the loan officer at the end of the year.
Other brokers operate on a flat fee model where loan officers receive a set amount per loan.
Still, other brokerages use basis point percentages to calculate the amount a loan officer will receive in exchange for originating their loan.
Several factors can impact a loan officers commission.
This figure can vary depending on the loan, the loan officers commission structure, the loan officers level of experience, the area in which the loan officer is originating, and more.
One of the most common factors that affect compensation is the type of loan. Some loan types, such as FHA or VA loans, may have higher commission rates for loan officers because of the additional paperwork and time required.
In addition, the terms of the loan or the loan amount can affect the overall commission. For example, a loan officer may receive a higher commission for larger loans.
Furthermore, the loan officers commission structure may also play a role in determining the commission rate. Some loan officers may receive a higher commission if they can close more loans in a given period of time.
Commission-based brokerages often introduce a commission cap to limit the amount of money a loan officer can earn on an individual loan.
Loan officers may receive different types of commissions.
For example, some brokerages operate on a flat-fee model. This means that the loan officer receives a predetermined amount for each loan they close.
Still, other brokerages use a Draw Against Commission model, allowing loan officers to receive a consistent payout against the promise of their future earnings. These draws are then paid back to the company as the loan officer begins to earn money.
In most cases, independent loan officers working at brokerages receive a percentage of the loan amount. For example, a $500,000 loan at a 1% commission rate will be paid out at $5,000. The commission rate scales higher for larger loans but can be limited with a commission cap or lowered by brokerage fees for software and administrative support.
The Loan Originator Compensation Rule (LOCR) is a federal rule that governs how loan officers are compensated. The LOCR tied with Regulation Z from the Truth in Lending Act are rules that require more transparency and implement prohibitions related to mortgage originator compensation.
At their core level, these laws limit loan officers compensation to be “reasonable and customary” in a manner that protects consumers against unfair practices. This means that loan officers must be compensated fairly and equitably and that their compensation must not be tied to the terms of the loan.
The LOCR also requires that loan officers disclose their compensation to borrowers.
This helps ensure borrowers know how much the loan officer will be paid and that the loan officers commission does not influence their decision to take out a loan.
How Loan Officers Make Money? Comp plans, BPS, rate sheets, and salaries?
FAQ
How to calculate loan officer commission?
Where does a loan officers commission come from?
How does MLO make money?
How does a lender get paid?
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 do loan officer commissions work?
The commission structure for loan officers varies widely; most are paid on commission. Commissions are calculated according to the basis points of the loan: Each basis point is 1/100th of 1 percent, so 25 basis points (BPS) equals 1/4 of 1 percent.
How are mortgage loan officers paid?
Mortgage loan officers are typically paid on commission, a combination of salary and commission, or a salary. Their pay is incentivized by how good they are at closing home mortgage loans. Bonuses or incentives may also be paid out. Mortgage loan officers have high earning potential, with compensation exceeding $200,000, as previously noted.
How do I calculate a loan officer’s compensation?
Calculating a loan officer’s compensation can be complicated. The most important factor is the loan officer’s commission structure. If the loan officer is paid a flat fee per loan, then the commission is simply the predetermined amount.