Mortgage Loan Originators: Who Are They & What Do They Do?

Article Summary:

The mortgage loan originator (MLO) is an integral part of the homebuying process. This individual or institution helps the borrower apply for, secure, and choose a mortgage loan.

The process of buying or refinancing a home can be daunting. There seem to be an endless number of steps and countless options, all of which have unfamiliar terms and confusing rates. Luckily, as you go through the process of buying or refinancing a home, there are many institutions, entities, and individuals that will help you along the way. One such entity is the mortgage loan originator or MLO.

The MLO works specifically to help the homebuyer to secure a mortgage and understand all the terms and conditions associated with the loan. In short, the MLO is the link between the borrower and the lending institution. In this article, we will explain who MLOs are, what they do, and what to expect while working with one during the home-buying process.

What is a mortgage loan originator?

A mortgage loan originator is an individual or institution that helps the home buyer with the mortgage loan origination process. Mortgage origination is the loan initiation process, starting when a borrower applies for a home loan up and concluding when the keys for the home are in the borrower’s hands. This process can be lengthy and involves many steps, from preapproval to loan application, loan processing, and loan underwriting. The loan originator ensures that the borrower moves through these steps as smoothly as possible.

Mortgage origination is the loan initiation process, starting when a borrower applies for a home loan up and concluding when the keys for the home are in the borrower’s hands.”

The entities that mortgage originators work for consist of retail banks, mortgage bankers, and mortgage brokers. They also might work for credit unions or other lending institutions. These entities can be large or small and may have different standards guiding their originators’ work. The term “mortgage loan originator” can refer to the individual who helps you work through the loan process, but it can also refer to the institution or lender that initiates the loan. Sometimes a mortgage loan originator is referred to as a mortgage broker.

What does a mortgage loan originator do?

In the simplest terms, a mortgage loan originator evaluates and recommends approval of loan applications for people and businesses. More specifically, MLOs walk borrowers through the mortgage application process all the way to loan closing. This may involve different things for different clients, but it broadly involves collecting credit and financial information, assessing needs, negotiating rates, and submitting your application for underwriting.

Why do I have to share so much private information with my MLO?

At the very first step, the MLO will collect and verify all the financial documents required to apply for a mortgage. Using this information, the MLO will evaluate the borrower’s creditworthiness, or if the borrower is qualified for a loan.

This is why you need to share information about your income and assets with your MLO. While MLOs cannot approve or deny your loan request, they are “insiders” to the process and can help you determine how likely it is you will be able to secure the loan you desire. An MLO who believes that you are creditworthy will help you decide which type of loan fits your purchase needs and financial situation.

Remember: the MLO will not decide if you get loan

It is important to remember that an MLO will not make the final decision on your loan application — whether or not to approve you — or how much to lend you. The lender’s underwriting department makes this decision.

How can I tell if a mortgage loan originator is qualified?

Before the housing crisis in 2008, MLOs did not have to be licensed. However, there are now protections in place when it comes to mortgage loans. To be an MLO, you must either obtain a state license or be federally registered.

For example, all non-bank mortgage loan officers must have a license in the states where they originate loans. Loan originator employed by banks, bank subsidiaries, or credit unions do not need to secure loan originator licenses. They are considered federally registered based on where they work.

To obtain federal registration, an individual must be an employee of a depository institution or an employee of an institution overseen by the Farm Credit Administration, such as a bank. All federal registrations of MLOs must be listed in the Nationwide Mortgage Licensing System and Registry. You should visit the NMLS consumer database to confirm your MLO’s registration.

NMLS: one acronym, two meanings


In addition to “Nationwide Mortgage Licensing System and Registry,” the acronym “NMLS” also stands, according to the NMLS’s own website, “for Nationwide Multistate Licensing System.”

What makes a loan originator qualified?

The Nationwide Mortgage Licensing System or NMLS oversees loan originator licensing. The NMLS offers licenses to those MLOs who meet requirements. Although the requirements vary by state, they are generally extensive, as you can see from this list:

MLO licensing: basic steps

Here are the basic steps an MLO licensee must complete, disregarding differences in requirements between states:

  1. Demonstrate financial responsibility and character as a lender
  2. Complete at least 20 hours of pre-licensing education
  3. Score 75% or higher on the NMLS written test
  4. Submit fingerprints for an FBI state and national background check
  5. Undergo an evaluation of personal history and experience, which includes an independent credit report

This is a simplified picture of the process. To learn more, read How to Become a Mortgage Broker in 8 Steps.

MLO qualification isn’t all you should consider

Regardless of your MLOs qualifications, you should never commit to a loan without feeling confident that it is the right decision for you and that you understand all the terms involved in the loan.

Pro tip: Borrowing money is a stressful process as the mortgage industry is constantly changing. You can judge MLOs based on how at-ease they make you feel. You should feel comfortable with your MLO — this is often a great sign that you’ve found a good one.

How do mortgage loan originators get paid?

As you are searching for the right MLO for you, you may be feeling as if the MLOs you meet are acting as salespeople, all trying to convince you to choose them over competitors. It may feel this way because most MLOs are paid on commission. This means that they only get paid when they close loans.

Luckily, this often works in your favor as a borrower. Loan originators are incentivized to submit applications that give borrowers the best chances for approval. This often means working hard on your behalf and applying for loans that best fit your credit profile.

Most mortgage loan originators are paid on commission, meaning they only get paid when they close loans. This can work in your favor. It means loan originators are incentivized to submit applications that give borrowers the best chances for approval.”

Once a mortgage is approved, the MLO will receive a percentage of the total loan amount. This percentage of this commission, called the mortgage origination fee, varies across lending institutions. Loan originators, however, typically receive 0.5%–1% of the loan amount in commission. For example, say you are purchasing a $400,000 home with $50,000 down. Your loan amount would then be $350,000. The MLO that worked with you through the loan application process would likely receive a 1% commission of $3,500 at the close of the mortgage.

Mortgage origination fee

As noted just above, the amount that the MLO receives in pay is called the mortgage origination fee. This typically comes out to 0.5%–1% of the total amount that the borrower is getting from the lender. This fee should cover all the steps of the mortgage origination process, from the pre-application to processing and underwriting.

You can find the final cost of your fee on your loan estimate under “Origination Charges.” The fee may be broken down into smaller sections, such as courier fee, document preparation fee, processing fee, tax service processing fee, and underwriting fee.

You should expect to pay the mortgage origination fee when you close your loan. It is possible to negotiate your origination fee, especially if you have several loan offers. You should use other offers to negotiate your origination fee with your preferred lender. It may not always work, but it is acceptable to do so.

What is the average mortgage loan originator salary?

According to the U.S. Bureau of Labor Statistics, the average MLO makes about $63,000 per year. Importantly, however, MLOs do not work on a salary but rather on commission. This means that MLOs working in high-priced cities or markets might take home a lot more money than the average MLO.

This might be changing. Some newer mortgage companies have started transitioning to salary pay for MLOs. The aim of this is to make lending more transparent for borrowers. In a commission-based model, an MLO might work for a larger loan amount that will yield a higher commission, even if that is not in the borrower’s best interest.

Mortgage loan originator vs. loan officer

A similar term to “mortgage loan originator” is “mortgage loan officer,” or simply “loan officer.” These terms may be used interchangeably, but there is a nuanced difference. A mortgage loan originator is either the lender or the individual professional who works with you. On the other hand, “loan officer” uniquely refers to the individual who helps you through the mortgage application process.

Mortgage loan originator vs. mortgage banker

It is important to remember that an MLO cannot decide to approve or deny your loan. In contrast, the mortgage banker can make this decision and review your application. Eventually, the mortgage banker will decide how much you can borrow and with what terms.

Choosing the right mortgage loan originator

In the process of applying for a mortgage, you should compare mortgage lenders and loan originators. As you contact potential lenders, you should compare APRs, fees, and additional perks that a loan originator offers.

Essential tip: It may be tempting to go with the first lender that you contact. However, borrowers who don’t shop around often lose money. One Freddie Mac study showed that you could save an average of $1,500 over the life of a loan with at least one extra rate quote, or an average of $3,000 with five quotes.

If a loan offer is unexciting, keep looking

If you receive a quote that is unappealing, do not feel as if you need to accept. Instead, let the loan originator know that you will come back when you have reviewed all your options. Allowing for more time is important and is not something you should be embarrassed to do. A mortgage is a significant financial decision and is worthy of careful consideration.

Is this originator one you could work with?

The last consideration is the working style of your loan originator. You will likely be working closely with this person and you should work well together. What is the loan originator’s communication style? Is this person a good educator? Do you see yourself working well with this individual, or do you see yourself getting frustrated? These are great questions to ask yourself before committing to an originator.

A good loan originator should have your best interests in mind and should be reliable and honest. Do not be afraid to do some research on the company, and don’t be afraid to shop around. Doing so will ensure that you make the best financial decision for yourself!

What is the difference between a loan officer and a loan originator?

A loan officer is an individual that helps the borrower through the loan origination process. A loan originator can be the professional individual that helps the borrower through this process, but “loan originator” can also refer to the institution or entity that works with the mortgage initiation.

What is the difference between a mortgage broker and a mortgage loan originator?

These are very similar positions that only differ in whom they work for. A mortgage broker works for a sponsoring broker, while a mortgage loan originator works for a bank or mortgage company.

Key takeaways

  • The mortgage originator is the individual or entity that helps borrowers apply for, secure, understand, and underwrite their mortgage.
  • Mortgage loan originators are highly qualified individuals that are held to federal standards. They should always have the borrower’s best interests in mind.
  • Mortgage loan originators work for a commission typically around 1% of the total loan amount.
  • As a borrower, you should take time to review several lenders and mortgage loan originators before settling on one. This will save you money!
View Article Sources
  1. Banker Resource Center: Mortgage Lending — Federal Deposit Insurance Corporation
  2. California Residential Mortgage Lending Act — California Department of Financial Protection & Innovation
    Example of the sort of resources typically available at the state level.
  3. CFPB Issuing Rules to Prevent Loan Originators from Steering Consumers into Risky Mortgages — Consumer Financial Protection Bureau
  4. Mortgage loan originator licensing — Oregon Division of Financial Regulation
    Example of the sort of resources typically available at the state level.
  5. NMLS Consumer access — Nationwide Mortgage Licensing System and Registry
  6. Origination activity — Consumer Financial Protection Bureau
  7. Why Are Consumers Leaving Money On The Table? — Freddie Mac
  8. How Much Do Mortgage Brokers Make? — SuperMoney
  9. How to Apply for a Mortgage? A Guide for First-Time Homebuyers — SuperMoney
  10. How to Become a Mortgage Broker in 8 Steps — SuperMoney
  11. Mortgage Industry Study — SuperMoney
  12. What Is a Mortgage Origination Fee and How to Avoid Them? — SuperMoney