Key takeaways

  • A mortgage loan originator (MLO) is employed by a lender to help borrowers move through the mortgage application process.
  • Mortgage loan originators do not make the decision about whether to approve your loan — they act more as an administrator, pushing paperwork through and explaining the loan’s terms.
  • Mortgage loan originators must be licensed by a state or federal authority, and are mandated to act in the consumer’s best interests.

You’re ready to buy the home of your dreams, and now it’s time to get the ball rolling on getting a mortgage. That’s where a mortgage loan originator comes into play. Here’s what loan originators do, and what you can expect while working with one during the home loan process.

What is a mortgage loan originator?

A mortgage loan originator (MLO) — sometimes just known as a loan originator — is an individual or entity integral to creating a home loan. From first contact to preapproval to formal application and on through to closing, the MLO helps borrowers move through the mortgage origination process as smoothly as possible.

Mortgage originators can work for a bank, credit union or other lending institution, large or small. Some are salaried, but many are compensated by commission.

Loan originator vs. loan officer: What’s the difference?
A loan originator can refer either to the entity or institution (lender) that initiates the loan, and also to the individual professional who works with you. A loan officer refers strictly to the person who helps you through the mortgage application process, ensuring that you complete and submit all documents properly in a timely manner.

What does a mortgage loan originator do?

Mortgage loan originators help borrowers through the mortgage application process, from initial inquiry to closing. Their work can involve collecting your credit and financial information, assessing your needs and what loan options make sense for you, negotiating rates and submitting your application for underwriting.

While they act as your representative, a mortgage loan originator won’t make the final decision on your loan application or how much money to lend you. That part is left up to the lender’s underwriting department, which evaluates your risk as a borrower.

Before a mortgage originator can help you through the financing process, though, they will need to convince you that working with them (and the lender they represent) is your best option. Because of that, some mortgage loan originators can appear and act like salespeople.

Since 2008, loan originators have been subject to stricter state licensing and other requirements, including the mandate to act in the best interests of borrowers whenever possible. That said, you shouldn’t ever feel pressured by a mortgage originator to commit to a certain mortgage product without first understanding what the offer entails.

Types of mortgage loan originators

There are two major types of mortgage loan originators: brokers and bankers. Here’s a look at how each one works:

  • Mortgage banker: A mortgage banker works directly for the lender funding your mortgage. They can serve as the point of contact between you and the institution, collecting your financial information, assessing whether you’re suitable for a mortgage and helping you understand your options.
  • Mortgage broker: A mortgage broker is not employed by the lender (though the latter often pays their fees or commission). Instead, they are independent professionals who act as a go-between between you and the lender you choose (or they help you choose) for your mortgage. The actual services are similar to a banker’s: They collect your financial information, process mortgage applications and send your information to the lender, who’ll process your closing paperwork if approved.

How to choose the right mortgage loan originator for you

When you’re seeking a mortgage, you can compare and choose between mortgage lenders and loan originators. It can be tempting to go with the first one you contact — you might even be impressed with the person’s offer or pitch. In fact, almost half of all homebuyers skip the rate-shopping process, according to a Freddie Mac study. Big mistake: Borrowers who don’t shop around before choosing a mortgage tend to miss out on better terms — mainly lower interest rates.

So, be sure to do your homework before choosing an MLO. Some tips to help you effectively evaluate your options include:

  • Get all the details. Be sure to ask about the loan’s interest rate, APR, fees and any added perks or discounts. These will be key points to know when you’re comparing mortgage offers and mortgage lenders.
  • Stand your ground. If the MLO is a bit pushy, politely request a quote and let the loan originator know you might circle back when you’ve reviewed all of your options. Although it can be an uncomfortable conversation to decline an offer or ask for more time, your mortgage is a big financial commitment, and it pays to be thorough.
  • Ensure the MLO is personable. It’s also important that you can envision working well together with this person. If you can’t understand what they say (or vice versa) or feel uncomfortable asking them questions, then they’re likely not the right fit. Discuss the loan originator’s communication style — will you regularly hear from them with status updates? —and confirm that it meets your preferences.

Ultimately, the right mortgage loan originator will have your best interests in mind, and create a smooth application and closing experience for you.

FAQ about mortgage loan originators

  • A mortgage origination fee is a lender’s charge you pay at closing to cover the cost of initiating, processing and funding your home loan. In general, you can expect the origination fee to range from 0.5 percent to 1 percent of the total amount you’re borrowing.
  • A mortgage loan officer isn’t always the same as a mortgage banker (though they work for one). The officer won’t make the decision to approve or deny you a loan; they just process it and communicate progress to you. In contrast, a mortgage banker can make this decision, and they review your application to decide how much you can borrow and under what terms.
  • Yes, loan officers need a license. They can receive a state license, with requirements varying from state to state, or a federal license. Generally, licensure requirements include credit and background checks, taking certain financial courses and passing an exam. To be an MLO, the individual has to be an employee of a depository institution (or a subsidiary of a depository institution), or an employee of an institution overseen by the Farm Credit Administration. MLO federal registrations are recorded in the Nationwide Mortgage Licensing System and Registry (NMLS). You can visit the NMLS consumer database to confirm your MLO’s registration. A good MLO should provide you with their license and registration number right away.
  • It depends. MLOs employed as loan officers are generally compensated through an annual salary or at an hourly rate, and earn a commission on every loan they close. However, most MLO brokers are paid solely via a commission directly from the lender once the loan closes.
  • The primary mortgage market refers to the origination and issuance of loans: the process by which you’ll meet with your lender, who processes your information, determines if you meet their underwriting guidelines, and if so, approves the mortgage and funds the loan. Afterward, it isn’t uncommon for your primary lender to sell your mortgage to aggregators or market-makers like Fannie Mae and Freddie Mac, who’ll combine multiple mortgages into mortgage-backed securities and sell them to Wall Street firms and investors. This is called the secondary mortgage market.