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When you apply for a mortgage, several individuals are positioned to guide you through the entire mortgage process. A mortgage loan originator (MLO) is an integral member of that system. A mortgage loan originator is a mortgage professional that helps home buyers or refinancers connect with the right mortgage loan.
In a nutshell, a mortgage loan originator is a bridge between mortgage consumers and a mortgage company. In this article, we’ll discuss mortgage loan originators and their role in the mortgage process.
What is a Mortgage Loan Originator?
A mortgage loan originator (MLO) or loan originator is an individual or institution integral to the mortgage origination process. The mortgage loan originator will help you choose the best mortgage, complete the necessary paperwork, and process the loan application.
From making your first contact with the mortgage company to getting pre-approved for a mortgage and through to closing on loan, a loan originator is an individual charged with the responsibility of helping you get through the mortgage loan process quickly and stress-free.
Generally, a mortgage loan originator can work for a bank, online mortgage lender, or credit union. Irrespective of where a mortgage loan originator works, they are often compensated through commissions.
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What Do Mortgage Loan Originators Do?
Unlike in the past, mortgage loan originators now wear many caps. In general, mortgage loan originators do all or some of the following:
- Identify potential homebuyers through advertising, connections, seminars, and other means
- Compile all the borrower information necessary for a loan application
- Present borrowers with loan options that make sense for them
- Keep accurate, thorough records on mortgage transactions
- Coordinate with other mortgage professionals like underwriters and appraisers
While it is widespread knowledge that mortgage loan originators serve home buyers, they also play a massive role within the mortgage and real estate industry.
The presence of experienced and genuine mortgage loan originators within the real estate and mortgage industry will see the rate of mortgage frauds and foreclosure drop drastically. MLOs are more of the frontiers in ensuring a stable home-buying market.
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How Do Mortgage Loan Originators Get Paid?
Mortgage loan originators typically get paid via commissions, and only if the loan closes. This payment strategy is a great advantage for the average mortgage consumer because it requires loan originators to put in more effort in helping the buyer close on the loan faster.
Once the mortgage loan closes, the loan originator will receive a certain percentage of the total loan amount. The commission percentage a mortgage loan originator receives will differ from one lending company to the other. However, it is common practice among mortgage companies to pay loan originators around 1% of the loan amount as commission.
So, let’s say you are purchasing a $300,000 home and putting 20% down, your loan amount would be $240,000. In this case, the loan originator that assisted you from application to the closing table might receive a 1% commission of $2,400. More importantly, the average mortgage loan originator makes just over $63,000 per year, according to the U.S. Bureau of Labor Statistics.
Do Mortgage Loan Officers Need to be Licensed?
Before the housing crisis of 2008-2009, there was no need for mortgage loan originators to be licensed before they could function as loan originators.
Nowadays, consumer protection has created the need for all non–bank mortgage loan officers to be licensed in the states where they originate loans.
However, suppose a mortgage loan originator is employed by a bank, a bank subsidiary, or even by a credit union. In that case, they do not have to carry a loan originator license.
For other non-bank mortgage loan officers, there is the need to undergo the following process to obtain a loan originator license. The process includes:
- Show financial responsibility, character, and general fitness as a lender
- Complete a minimum of 20 hours of pre-licensing education
- Score at least 75 percent on the NMLS written test
- Submit fingerprints to the NMLS for an FBI state and national criminal history background check
- Submit an accurate and thorough personal history and experience document to the NMLS that includes an independent credit report, as well as any information regarding administrative, civil, or criminal findings in any jurisdiction
Generally, mortgage loan originators are licensed by the Nationwide Multi–state Licensing System.
How to Choose a Mortgage Loan Originator
It is no news that a typical home buying journey can be quite an overwhelming and challenging experience.
But working with the right mortgage loan originator can reduce the burden and pave the way for a stress-free mortgage application process. So how do you choose a mortgage loan originator?
- Choose a mortgage loan originator with ample experience in the type of loan program you are applying for.
- Since mortgage loan applications (VA, FHA, USDA, & Conventional) require you to submit personal financial documents, you must choose a mortgage loan originator that you can trust with such information.
- Check out a mortgage loan originator website and social media pages for reviews from past clients. You can find the mortgage company and loan officer rating on Better Business Bureau.
- A typical mortgage process requires back and forth communication among all the parties involved in the process. It would help if you chose a mortgage loan originator that is a good communicator, excellent listener, and possesses a problem-solving persona
- Ask for recommendations from friends and family. More importantly, follow your gut when looking to choose a loan originator for your loan.
Is It Safe to Work with a Mortgage Loan Originator?
If you’ve done the necessary background checks on a mortgage loan originator, then it is safe to work with the mortgage loan originator. Most loan originators are licensed and registered with their related state boards, which gives home buyers an extra layer of protection when working with a loan originator.
Working with a loan originator offers homebuyers several benefits. From working with an individual with vast experience in the type of loan you are applying for to having a mortgage guide, the benefit of working with a loan officer supersedes its drawback. Remember to research mortgage companies and loan originators before settling for one.
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Bottom Line: Mortgage Loan Originator
A mortgage loan originator is charged with the responsibility of walking homebuyers through the process of applying and securing a mortgage for their next home purchase. Typically, mortgage loan originators may work directly with a mortgage lender or serve as a mortgage broker.
While it is common for mortgage loan originators to be licensed in the various states where they originate loans, homebuyers must do a comprehensive background check before choosing an MLO to work with. Above all, homebuyers should review multiple mortgage loan originator offers before choosing one to work with.