Content of the material
- 1. Your own best interest
- How can I find a mortgage broker?
- Do loan officers make a commission?
- Do mortgage brokers need a license?
- 2. How Much Do Loan Officers Make?
- What about benefits?
- 8. Average Pay For Mortgage Loan Officer
- Okay great, so what do brokers make?
- Mortgage Loan Officer Earning Potential
- How Mortgage Broker Compensation Works Today
- 5. You can do better
1. Your own best interest
It’s fair for consumers to question whether mortgage loan officers are acting in their best interests. A useful starting point is to ask: How are these loan officers compensated?
Loan officers typically get paid in two ways: 1. Commission, calculated as a percentage of the total loan amount 2. Incentives for selling certain financial products or reaching quotas
Both sources of compensation can create a conflict of interest. Let’s think about commission. Since it’s a percentage of the total loan amount, the bigger the loan they sell you, the bigger the commission. This issue played itself out for years leading up to the 2008 subprime mortgage crisis. Banks and mortgage brokers aggressively pushed mortgages that borrowers couldn’t afford, while loan officers got paid handsomely to intermediate. If you’ve seen the 2015 film The Big Short, you’ll be familiar with this scenario.
In the case of sales incentives, you’ve probably seen that Wells Fargo was ordered to pay over $185 million “to resolve allegations that the bank’s sales quotas and incentives pushed employees to open millions of unauthorized accounts” and now faces an inquiry by the U.S. Department of Justice. While this case does not involve mortgages, it clearly demonstrates the problem with sales incentives.
What happened is this — the company set very aggressive goals to cross-sell other Wells Fargo products. For example, bank employees who cross-sold a certain number of checking accounts received incentive pay. To cash in on these incentives, over 5,300 employees set up more than 2 million fake accounts without customer consent. Customers got duped, the employees got fired, and Wells Fargo got in serious trouble.
It’s clear that both commission and incentives are horrible at aligning a loan officer’s interests with your own. To avoid any such conflicts, Better Mortgage pays loan officers a fair salary with no commission. Our staff offers support, not sales, to ensure alignment with your best interest.
How can I find a mortgage broker?
To find a mortgage broker, it’s usually best to ask for recommendations, such as from a local real estate agent, lawyer, accountant, or neighbor who has recently used a broker. You can also find lists of brokers online.
Do loan officers make a commission?
The income of a loan officer depends largely on whether their employer pays a flat salary or has a commission-based structure in place. 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.
Average commission: $24,000 per year
Related: Learn About Being a Loan Officer
Do mortgage brokers need a license?
Yes. Mortgage brokers are regulated under the federal Secure and Fair Enforcement for (SAFE) Mortgage Licensing Act of 2008 and are licensed by the states. To obtain a license, they must complete a list of required courses and pass an exam. Once licensed, they must also take continuing education courses each year.
2. How Much Do Loan Officers Make?
Feb 22, 2021 — The income of a loan officer depends largely on whether their employer pays a flat salary or has a commission-based structure in place. As a (4)…
5 days ago — Most mortgage loan originators receive a commission on the loans they originate. The size of the commission and how it is calculated differs Do mortgage loan originators receive a commission?How much do similar professions to mortgage loan originator get paid?(5)…
Feb 28, 2009 — For loan officers who work at mortgage banks (also sometimes referred to as “correspondent lenders”) or mortgage brokers, the vast majority of (6)…
What about benefits?
MLOs in North Carolina and other states enjoy competitive pay with benefits. Many companies offer full benefits packages, including health insurance, life insurance, retirement plans, and more. Some offer additional perks like commission bonuses, gym memberships, and marketing support.
8. Average Pay For Mortgage Loan Officer
The average smaller mortgage pays compensation plans would create Aims to waive loan officers make six-figure right after six months of training. Meet.(24)…
The average salary for a Mortgage Loan Officer is $49097. Visit PayScale to research mortgage loan officer salaries by city, experience, skill, employer and (25)…
Their employers often do not pay them on an hourly basis, If you’re a mortgage loan officer who is not being paid overtime in Connecticut, (26)…
Okay great, so what do brokers make?
- A survey said they were paid 2.25 points per loan on average
- On a $300,000 loan amount that would be $6,750 in compensation
- While it sounds like a tidy sum, you have to consider their volume and operating costs as well
- It’s pretty close to what real estate agents make, usually 2.5% of the sales price
A press release from 360 Mortgage Group detailing the compensation changes said mortgage brokers generate an average revenue of 2.25 mortgage points on a home loan.
For example, on a $500,000 mortgage, they’d make roughly $11,250 in revenue. That sounds pretty good, doesn’t it?
But as mentioned, we have to subtract the costs of doing business, which are variable. From there, you’d have your profit per loan.
Not a bad take for helping people get mortgage financing, depending on how many loans are closed each month, and what expenses are involved.
As you can see, mortgage broker salary will definitely vary based on the size of the loans they typically close. In more expensive areas of town (or the country), brokers might make six-figures or much, much more.
While those in lower-priced metros could make significantly less if costs are still relatively similar.
Additionally, brokers who focus on mortgage refinances might have higher loan volume than those who help home buyers purchase real estate, as the latter can be harder to come by and slower to close.
Of course, if they partner with a local real estate office or two, they have the ability to generate a ton of purchase loan business too, so it’s hard to say either specialty would be more successful universally.
Their average income will also depend on the financial institutions they choose to partner with, as compensation structures and points per loan will vary across different mortgage lenders.
One aspect of a mortgage broker’s job is linking up with lending partners that are good at quickly closing loans, while also offering competitive pricing. As such, these partners can greatly affect a mortgage brokers salary.
Mortgage Loan Officer Earning Potential
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. A whopping 36% 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 Mortgage Broker Compensation Works Today
- Brokers can no longer get paid twice on a single loan
- Instead they have to choose how they want to be compensated, by the borrower or lender
- They may have a different compensation package with each lender
- So depending on where the loan is placed their commission could vary from loan to loan
As noted, the controversial practice outlined above was outlawed in 2011.
The Fed came in and changed all that by effectively banning yield spread premiums, and now mortgage brokers can only get paid by the borrower OR the lender, not both.
That doesn’t mean they can’t still make a lot of money per loan, it just means the way they can get paid via the wholesale mortgage channel has been limited.
In other words, they either charge you directly to close the loan or they get paid by the lender and you pay for that commission indirectly (not out-of-pocket at closing) via a higher interest rate.
If charging directly, the borrower pays for the broker fee or origination fee, loan processing, and so on. Compensation can also vary from loan to loan.
If being paid by the lender, it’s similar to YSP, but brokers must now choose a compensation plan upfront with each lender they work with, as opposed to charging different amounts on each loan as they see fit.
And they usually must stick with that compensation plan for three months before they can change it again.
For example, they may choose to earn 1% commission on every loan they close with Bank A. So if the loan amount is $500,000, they’d earn $5,000. If it’s $300,000, they’d only get $3,000. And so on.Want a fast, free rate quote? Quickly get matched with a top mortgage lender today!
But they may select a higher compensation structure with Bank B that gives them 1.5% on each closed loan.
Assuming the loan terms and cost are the same, they can send your loan to Bank B for a higher commission, as it won’t affect what you ultimately receive.
However, a different broker may decide to set all their compensation levels at 2%, and if you happen to work with them your interest rates may be higher across the board to account for their higher commission.
So you kind of have to shop mortgage brokers too in order to find the one offering the lowest rate/costs.
In other words, you can still get a raw deal, or at least a not-as-good deal. The good news is they can no longer get paid on both the front and back end of the loan.
But you should continue to be vigilant and look over your loan documents to ensure you aren’t being overcharged.
In short, you’ll want your broker to send your loan to the bank that offers you the lowest interest rate, not the one that gives them the highest commission.
5. You can do better
We’ve established four reasons why it’s bulls#!t for you to get stuck with higher rates and origination fees to effectively pay for loan officer commission. But the very best reason is — you don’t have to.
You can choose to work with Better Mortgage. We have industry-leading rates. We don’t charge origination fees. And our loan officers don’t get paid commission, ever.
As a Better Mortgage borrower, you can complete your entire digital mortgage process online. You have direct access to our systems, which:
- Match you to the largest mortgage end investors in the world (including Fannie Mae).
- Find the best mortgage at the lowest rate for your specific situation.
- Guide you through the application process with 100% transparency.
Our loan officers are here to support you with any questions or concerns you may have (which is what humans are actually good at). But they don’t get paid commission. You deserve better than that.Get Pre-Approved
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Bogle, John (2016), “The Index Mutual Fund: 40 Years of Growth, Change, and Challenge” ↩