What Is A Mortgage Loan Originator?

When you’re buying a house, you’ll quickly realize that the mortgage industry comes with plenty of new vocabulary attached. A mortgage loan originator is one thing you’ve likely never heard of until now. The good news is that a little bit of knowledge can go a long way. We will explore what a mortgage loan originator (MLO) is below.

What Is A Mortgage Loan Originator?

An MLO is an individual or financial institution that facilitates the mortgage process for a borrower. A loan originator can be a loan officer, a mortgage broker, a bank or another financial institution. All of these professionals help move an initial mortgage application loan through to closing day.

What Does A Mortgage Loan Originator Do?

A mortgage loan originator can come in different forms. Below is a breakdown of how a mortgage loan originator may operate.

• Loan officer: As the employee of a mortgage lender, a loan officer’s job is to manage the borrower’s mortgage application process from the initial application during the preapproval process through the complete underwriting to get the home buyer to closing day. Their job is to help borrowers avoid the pitfalls that can derail a mortgage application. Importantly, the MLO doesn’t make the final decision on the loan. 

• Mortgage broker: Independent mortgage brokers are compensated through commissions on the mortgage loans they’re working to originate. In return, they often have arrangements with different lenders that could reduce a borrower’s closing costs. Ultimately, a good mortgage broker can help you get to the finish line. 

• Bank or financial institution: A mortgage loan originator can also refer to the lender themselves: a bank, credit union, savings-and-loan institution or a non-bank lender like Rocket Mortgage^®. The lender makes the decision on your loan application. When the term “mortgage loan originator” is used by investors discussing mortgage bonds, it usually has this meaning.

What Are The Licensing Requirements For Mortgage Loan Originators?

Each state has its own licensing laws and its own description of what services the license entitles the holder to perform. It’s the reason that two people doing the same work might be called an MLO in one state and a mortgage broker in another. 

To find out exactly what license your mortgage advisor holds and what it allows them to do, or to find a licensed service provider, check out the National Mortgage Licensing System (NMLS) Resource Center. It has a lookup tool that will provide the information you’re looking for.

How Much Does It Cost To Use A Mortgage Loan Originator?

You’ll pay an origination fee as a part of your closing costs. This fee is used to compensate the mortgage loan originator. In general, you can expect to pay around 1% of the loan value in origination fees.

Tips On Choosing The Right Mortgage Loan Originator For You

The right mortgage loan originator for you varies based on your unique situation. Here are some strategies to help you select the right fit:

• Choose someone communicative and trustworthy: It’s critical to find a loan originator you can trust. Additionally, you’ll want to work with someone who can communicate clearly and is able to answer all mortgage-related questions.
• Research your originator for any complaints: A quick search of the originator with your state’s licensing board can help you find any negative feedback. If many customers have complaints, consider another option.
• Shop around for the best loan terms: Shopping around for a mortgage can help you lock in the best possible loan terms.

Mortgage Originator FAQs

You have questions about mortgage originators. We have answers.

What’s the difference between a mortgage loan originator and a mortgage loan officer?

A mortgage loan officer manages the loan application from start to finish. They can help you apply for a loan. But the mortgage loan is funded by the lending institution.

What’s the difference between a mortgage loan originator and an underwriter?

Mortgage loan originators work with underwriters to make a decision on your loan application. While the mortgage loan originator might rely on the expertise of the underwriter, the MLO is the entity funding the loan.

How much are mortgage origination fees?

The mortgage origination fee covers the lender’s costs of processing your loan application, primarily processing and underwriting services. You can expect these fees to run between 0.05% and 1% of the loan amount.

How does an MLO earn their license?

The National Mortgage Licensing System seeks to expand multistate licensing to ease the problems caused by having to conform with 50 sets of licensing laws and to standardize mortgage licensing educational requirements. But complying with NMLS standards is not a substitute for meeting each state’s licensing requirement, as the state may have additional requirements. MLOs usually must pass a licensing test in their state.

How much do mortgage loan originators make?

According to the U.S. Bureau of Labor Statistics, the median pay for a loan officer is $65,740 per year. Of course, the amount each mortgage loan originator makes varies based on the number of loans they close each year.

How do I become a mortgage loan originator?

In order to become a mortgage loan originator, you’ll need to complete prelicensing coursework. After you pass the licensing test in your state and meet any additional requirements, you’ll be a mortgage loan officer and, depending on where you work, you could be a loan originator.

The Bottom Line

A mortgage loan originator will work with you during the home closing process. As you navigate the final step of the home buying process, working with an MLO you can trust will make all the difference. Additionally, the MLO’s communication style can make or break your experience. Doing a bit of upfront research can help you find the right MLO for your situation.

If you are ready to purchase a home, start the mortgage process with Rocket Mortgage today.