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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, or MLO — sometimes just known as a loan originator — is an individual or entity integral to the mortgage loan origination process, or the initiation of a loan. From making first contact with the originator, to getting preapproved, to applying for a loan and on through to closing, the loan originator will help you move through the process as smoothly as possible.
Mortgage loan originators can work for a big bank, a credit union or other lending institution, large or small. It depends on where they work, but many are compensated based on commission.
Is a mortgage loan originator the same as a loan officer?
You might hear the terms “mortgage loan officer” or “loan officer” (LO) used interchangeably with mortgage loan originator, but there is a slight distinction between the two. A loan originator can refer to the entity or institution (lender) that initiates the loan, and also to the individual professional who works with you. A loan officer strictly refers to the individual that helps you through the mortgage application process, ensuring that all documents are completed properly and submitted in a timely manner.
Mortgage banker vs. mortgage loan originator
A mortgage loan originator is different from a mortgage banker in that the originator won’t make the decision to approve or deny you a loan. In contrast, a mortgage banker can make this decision, and reviews your application in order to decide how much you can borrow and under what terms.
What does a mortgage loan originator do?
Mortgage loan originators help borrowers through the mortgage application process and the loan closing. This 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.
Importantly, a mortgage loan originator won’t make the final decision on your loan application or how much to lend you. That part is left up to the lender’s underwriting department, which evaluates your risk as a borrower.
Before a mortgage loan originator can help you through the financing process, though, she will need to convince you that working with her is your best option. With that, some loan originators can feel 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 when possible. That said, you shouldn’t ever feel pressured by a loan originator to commit to a certain mortgage product without first understanding what the offer entails.
What are the licensing requirements for mortgage loan originators?
Becoming a mortgage loan originator requires either obtaining a state license or being federally registered as an MLO.
In order to obtain federal registration, 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.
State licensing requirements vary slightly, but typically involve providing fingerprints for an FBI criminal history background check, undergoing a credit report check, taking NMLS pre-licensure education courses and then passing an exam.
How much are mortgage origination fees?
A mortgage origination fee is a charge from a mortgage lender that covers the cost of services such as loan origination, processing and underwriting. In general, you can expect the origination fee to range from 0.5 percent to 1 percent of the total amount you’re borrowing for your mortgage.
How to choose the right mortgage loan originator for you
When you’re seeking a mortgage, you have the ability to 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. Borrowers who don’t shop around before choosing a mortgage, however, can lose money. In fact, almost half of all homebuyers skip the rate-shopping process, according to a Freddie Mac study. You could save an average $1,500 over the life of your loan by obtaining at least one extra rate quote, the study shows, or an average of $3,000 by getting five quotes.
Fortunately, it’s easy to compare mortgage rates and lenders with Bankrate. Take time to find the best mortgage lender, and be sure to consider offers carefully, including comparing the APR and fees and any additional perks a loan originator shares with you.
If you run into a hard pitch, stand your ground. 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 significant financial commitment, and it pays to be thorough.
It’s also important that you can envision working well together with your loan originator. If you can’t picture working on a major financial puzzle with the person, then he’s likely not the right fit. Ask questions about the loan originator’s communication style — will you regularly hear from him 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.