If you're looking to purchase a home and need to obtain a mortgage loan, you will have to work with a mortgage loan originator. A mortgage loan originator plays an essential role in the loan process and is the initial point of contact when getting a loan. Learn what a mortgage loan originator is, what they do, and a few tips on working with a loan originator.
What is a mortgage loan originator?
A mortgage loan originator (MLO) is licensed to originate mortgage loans for both commercial and residential mortgages. Their job is to advise their client on the various financing options as well as help them through the complete mortgage transaction -- from application to closing.
An MLO must have a loan originator license within the Nationwide Mortgage Licensing System and Registry (NMLS), which allows them to work at a bank as a mortgage banker or independently as a mortgage broker. MLOs work together with a larger team including the loan underwriter, loan processor, borrower, title company, and lending institution to help originate a mortgage loan.
What does a mortgage loan originator do?
The mortgage loan originator's job will vary depending on whether they work at a financial institution or as an independent mortgage broker. However, some of their general duties are to:
- Interview mortgage applicants.
- Help applicants apply for the best-suited loan package available.
- Work with the borrower to gather required paperwork, such as financial information and verification documents.
- Monitor the progress of the loan during loan processing until it's closed.
How does a mortgage loan originator get paid?
MLOs get paid a commission, which is usually a percentage of the loan amount. This means the more loans they originate, the more money they make. They also don't get paid if the loan does not close, so this makes them very motivated to match you with the best loan offer for you based on your credit score, income, and other personal and financial circumstances to ensure that the loan can be underwritten and closed.
Tips for working with a mortgage loan originator
The SAFE mortgage licensing act, which was enacted in 2008, requires all mortgage loan originators to:
- Pass a written qualified test.
- Complete pre-licensure educational courses.
- Take annual continuing education courses.
The goal of this act is to have more informed mortgage brokers and mortgage bankers, which provides more protection to the borrower.
While this does add an extra level of safety and reduces the risk of repeating the poor mortgage origination practices that took place prior to 2008, prospective borrowers should look at the mortgage loan originator's experience, knowledge of their product, and level of guidance based on their personal information before accepting any loan terms.
Why you might choose a mortgage broker over a mortgage banker
Mortgage bankers are limited as to what loan packages they can offer based on what their financial institution currently provides. Since they only get paid when a loan closes, it's likely that if they don't have a good fit for you, they will still push one of their loan packages on you hoping you will get the loan through closing. Mortgage brokers, on the other hand, are not confined to one bank's current packages and therefore have more offers and loan packages to pull from.
Ideally, you want to find a mortgage broker or banker who is a good communicator and is working in your best interest to find the most appropriate package, rate, and offer for you based on your personal and financial circumstances.