Demystifying Mortgage Loan Originator Commission Structures

As a mortgage loan originator, your compensation is likely a big factor in your career decisions MLO commission structures can vary widely depending on where you work In this comprehensive guide, I’ll explain the typical MLO commission models, the pros and cons of each, and tips for maximizing your income.

Commission Structures for Mortgage Loan Originators

There are three primary compensation structures for mortgage loan originators:

1. Straight Commission

This is the most common structure, especially at smaller independent mortgage brokerages. Your entire income comes from a percentage of each loan you originate.

Typical commission splits range from 20% to 80% of the brokerage’s origination fees. The higher splits go to top producers originating a large volume of loans.

• Pros: Unlimited earning potential aligned with your productivity. The harder you work, the more you make.

• Cons Unpredictable fluctuating income You shoulder all the risk as your pay relies entirely on closed loans

2. Salary Plus Commission

Some lenders pay a base salary plus commissions on top This provides some income stability while still rewarding production

Base salaries often range from $30,000 to $60,000. Commissions may be 2-10% of the loan amount or a flat fee per closed loan.

• Pros: Steady income plus upside through commissions. Ability to build guaranteed income over time.

• Cons: Caps on commission earnings. Less incentive for high performers to maximize production.

3. Salary Plus Bonus

MLOs at large banks and credit unions usually get a salary plus a bonus per funded loan. Bonuses average $150-$300 per closed loan.

Salaries average around $45,000, with total compensation averaging $85,000 including bonuses.

• Pros: Reliable income and benefits like healthcare. Bonuses still align pay with production.

• Cons: Lower earning ceiling than commission structures. Limited flexibility in pay.

Within each structure, an individual MLO’s pay can vary dramatically based on their productivity, experience, and employer.

How Mortgage Loan Originator Commission is Calculated

MLO commission is generally calculated as a percentage of the origination fees charged on each mortgage. This origination fee is typically 1-2% of the loan amount.

For example:

• A $300,000 mortgage with a 2% origination fee equals $6,000.
• The brokerage’s share of this fee is $3,000.
• The MLO receives a 60% commission split.
• Their commission on this loan would be $1,800.

Commissions may also be a flat fee per loan (e.g. $500) or a set percentage of the loan amount (e.g. 0.5%).

Bonuses are usually structured as flat fees, such as $150 per funded loan. Some bonuses are tiered based on loan size, with higher bonuses for jumbo mortgages.

Tips for Increasing Your MLO Commission

As an MLO, your mission is to close as many loans as possible. Here are some tips for boosting your commissions:

• Originate higher loan amounts – more dollars means larger fees and commissions.

• Specialize in niche products like jumbo mortgages to earn higher origination fees.

• Generate repeat and referral business by providing an exceptional borrower experience.

• Build partnerships with real estate agents to drive more mortgage business your way.

• Get leads by hosting first-time homebuyer seminars or sending out direct mail.

• Seek mentoring from top producing MLOs at your company to improve your skills.

• Negotiate a higher commission split once you’ve built a track record of strong production.

• Switch to a brokerage offering higher commission splits.

• Consider getting your real estate license to represent both sides of the transaction.

With the right strategies, you can significantly grow your annual MLO earnings. The key is consistently generating more loans month after month and year after year.

Salary vs. Commission for Mortgage Loan Originators

Should you choose a salary-based or commission-based position? Here are some key considerations:

Salary

• Provides income stability and ability to budget
• Allows you to build up guaranteed earnings
• Gives access to benefits like healthcare
• Less pressure and risk than 100% commission

Commission

• Unlimited earning upside tied to your productivity
• Greater incentive to maximize sales
• Allows paying top producers what they’re worth
• More flexibility to move between companies

Younger MLOs may prefer salary to rely on as they build their business. Commission opens the door for exponentially higher incomes for experienced high producers.

Analyze the overall compensation package when comparing positions – don’t just look at base pay. Factor in commissions, bonuses, benefits, and long term income growth potential.

While commission structures are more common, salaries are on the rise in the mortgage industry. According to Stratmor Group, nearly 30% of independent mortgage brokerages now pay some portion of MLO compensation as salary.

Things to Consider About MLO Commission Structures

As you evaluate job offers and think about your earning potential, keep these key considerations around MLO commission in mind:

• What’s the average commission percentage or bonus amount per loan?
• What’s the earning potential over 12 months based on expected production?
• How much does commission vary between low and high producers?
• How long does it take for new MLOs to build up their book of business?
• Does the employer pay for leads or do you generate your own?
• How much do top producers earn at the brokerage?
• Is there flexibility to increase commission splits over time?
• Does the company culture support MLO success?

Finding the right mortgage sales job is about more than just commission structure. But understanding how you’ll be paid is a key piece of the puzzle in reaching your income goals.

Hybrid MLO Commission Models

Some lenders are pioneering hybrid commission structures, blending aspects of salary, bonuses, and commissions.

For example, Guild Mortgage offers a base guarantee draw for the first 6-12 months that converts to commissioned earnings as your business scales. They also provide company-paid leads.

These hybrid models give MLOs income stability as they build up clients. Once commissioned earnings surpass the guarantee, it converts to uncapped commissions.

Expect more creativity around compensation as brokers compete for talent. The lines between salaries, bonuses and commissions will blur more over time.

How Much Do Mortgage Loan Originators Make?

According to the Bureau of Labor Statistics, the average mortgage loan officer in the U.S. earns approximately $76,000 per year. However, incomes vary widely:

• Top 10% earn more than $141,000 annually
• Bottom 10% earn less than $34,000 annually

The most successful MLOs bring in a high volume of loans at healthy sizes. Commission structures reward this productivity, with top producers commonly making over $200,000.

Location also impacts MLO incomes, with coastal states and metro areas paying the most. Expect $10,000+ higher average earnings in markets like Los Angeles, New York and Miami.

As you consider mortgage sales roles, realistically assess your ability to hit production goals. Research incomes specific to your geographic area. Weigh earning potential against your lifestyle needs when setting career and income targets.

Making the Most of Your MLO Commission Opportunity

In my first year as a mortgage loan originator, my goal was simply to break even. Any commissions I earned were merely a bonus. By year two, I doubled my income. Within five years, I was earning over $200,000 per year originating over $50 million in mortgages annually.

I succeeded by specializing in jumbo mortgages in an affluent area, generating referral business from realtors, and optimizing every part of the lending process to close loans faster. I found a brokerage that rewarded my work ethic with high commission splits.

Regardless of what compensation model your employer uses, the principles are the same – be maniacally focused on sales activity and provide five star service to every client. This will maximize your commissions over the long run.

Hopefully this guide provided clarity and insights into mortgage loan originator commission structures. Please reach out if you need any guidance or have additional questions! I’m always happy to help fellow MLOs accelerate their careers and income.