Understanding What a Loan Originator is and Their Role

Loan originators are the people who help you find a loan that suits your financial needs. They work for banks, mortgage companies, and other lenders. Their job is to find the best products for you and help you with all of the paperwork associated with the loan.

Although they may work at the same company, a loan originator is not the same as a mortgage broker. A loan originator is a lender employee who seeks out customers and tells them about the different loans that are available. The loan originator then works with those customers as well as with the bank to get the right deal for everyone.
In this article, we’ll further discuss what a loan originator is, what their role looks like, and how to choose a loan originator who can serve you best!

What is a Mortgage Loan Originator?

A mortgage loan originator is employed by or associated with a licensed mortgage lender. Their main goal is to provide direct assistance with the origination of loans, as their title suggests.

Mortgage loan originators are responsible for gathering pertinent information from borrowers, like their names, addresses, and Social Security numbers. This information is required in order to submit loan applications.

They do this by preparing and submitting an application to their firms, along with any other documentation that has been requested. Mortgage loan originators verify all of the information that lenders submit, and then they process the documents via underwriting after they are approved. They will also assist in closing on a house on behalf of the lender as well.

Mortgage loan originators are required to be licensed to work or be employed in this field. In most cases, mortgage loan originators are considered to be dual-employed. This means that they are typically employed by a residential mortgage lender, who are also known as retail lenders, in addition to being employed by a wholesale mortgage banker as well.

What is a Loan Officer?

A loan officer acts as a liaison between an individual or a couple and the financial institution administering their mortgage. When a person applies for a home loan, the loan officer gathers all of the materials that are needed in order to process the application and check for any potential problems along the way.

Loan officers often work as employees of banks or mortgage companies, though many also work as independent consultants. The loan officer then presents the completed application to a committee that will decide on the loan's approval.

In doing so, they will consider the person's financial qualifications. However, the committee does not use this information to decide what the interest rate should be for the loan, as market conditions and factors will determine this, meaning the interest rate is out of their control.

Once approved, the loan officer is responsible for assessing the person's current financial situation, including their taxes and credit history. This is used to determine what kind of interest rate will be offered alongside the mortgage.

The loan officer can help a person understand their legal rights in relation to mortgages, while also advising them on the process of purchasing a property altogether. This includes creating a budget and explaining the legal documentation involved, especially the closing statements.

Moreover, loan officers are responsible for coordinating with third-party companies involved in the steps of processing and finalizing the mortgage. Some of these steps include the help of surveyors, appraisers, testers, and title companies. Loan officers also communicate with the seller of the home to arrange for payments and select the official closing date of the sale.

A loan officer will work closely with their clients to determine their needs regarding the property being purchased, including location, size, and the type of house or apartment. The officer may provide information about different mortgages that can be used to finance the purchase, and they will also often help with determining whether a person qualifies for any government home loan programs or not.

What Does a Mortgage Loan Originator Do?

Mortgage loan originators (MLOs) are responsible for originating and processing mortgages. They perform a series of checks on borrowers' credit history to ensure their ability to repay the loan. The most common alternative job titles for MLOs are loan officer, mortgage consultant, and mortgage banker.

Mortgage originators can work as independent professionals under the title of loan originators. They are responsible for handling the entire mortgage process from start to finish. They also work as bank employees or independent contractors alongside banks and other institutions that work to maintain in-house lending departments.

Mortgage loan officers are a key part of the lending team, from their initial contact with the borrower all the way to finalizing the closing process. That said, the main job of MLOs is to educate prospective borrowers on their loan options and find the one that will best suit each client's needs.

However, it's important to note that not all mortgage professionals who originate loans are official MLOs or loan officers. A subspecialty of the real estate profession known as lending is conducted and supervised by a class of highly-trained and experienced individuals called loan consultants.

A large percentage of an MLO’s job is performed behind the scenes while they work to ensure that borrowers receive loans that they can afford to pay back and that the paperwork is in order. They review credit reports, analyze income documents, and verify employment history to ensure that a potential borrower can repay their loan obligation. They might also look for signs of fraud or other illegal activity during this process, such as unreported income or fictitious assets.

They also sell or originate loans, thus earning their income as a percentage of each loan that they sell. The most common compensation method is to receive a flat fee based on the transaction rather than a set salary. Some MLOs are also paid bonuses and commissions for meeting their sales-related goals.

Mortgage Banker vs. Mortgage Loan Originator

A mortgage banker is a company or organization that collects money from investors and invests that money into mortgages. As such, a mortgage banker does not deal directly with the customer. Instead, they collect payments from borrowers and pay investors based on those payments.

On the other hand, a mortgage loan originator works at a financial institution with the permission of a mortgage banker, and the loan originators work on selling loans to potential buyers. The mortgage loan originator also collects payments from borrowers and pays investors based on those payments.

The main difference between a mortgage banker and a mortgage loan originator can be understood in simple terms with the following analogy. Let’s imagine a scenario that centers around the stock market.

A mortgage banker is the company or organization that buys a stock and sells it to another person. Likewise, a mortgage banker does not directly deal with the buyer or seller, but rather, they make money by buying and selling stocks.

Conversely, a mortgage loan originator is someone who would manage all of the actions, like buying a stock, selling it to another person, and all of the in-between stages. This way, the buyer and seller don't directly deal with each other.

How Do You Choose a Mortgage Loan Originator?

Buying a home is one of the biggest investments you’ll ever make in your lifetime. With that said, finding the right mortgage loan originator to assist you through this process should be a priority for the sake of your homeownership experience. Here are some tips on how to choose the best mortgage loan originator for you.

Do your research first before asking for recommendations. Start by doing your homework on loan originators in general. You can start by checking with friends, family members, or co-workers who have recently purchased a home.

Ask them about their experiences, and inquire as to whether or not they were satisfied with the professional services they received. Don’t forget to get their honest feedback and the results from working with a particular mortgage loan originator. They may be able to refer you to some reputable professionals, too!

You can also look for online reviews from people who have purchased a home in the past few years. Make sure you narrow down your list of professionals to those with positive comments and impressive Yelp ratings, as these details typically indicate high-quality service.

You can also consider visiting professional associations such as the National Association of Mortgage Brokers or the Mortgage Marketing Association for more information about professionals in your area. Visit their office and ask questions, now that you have a list of professionals whom you can speak with.

When you meet with these professionals, you should ask them for information regarding their professional backgrounds. Be sure to look into their educational history, completed training programs, work experience, location of registration, and active memberships with professional associations.

Some questions to consider asking include the following:

  • What percentage from the selling price will I receive after closing?
  • What are the different types of programs you offer?
  • What kind of loan products do you sell?
  • How long have you been offering your services?
  • Do you work with multiple buyers at the same time?
  • Are you exclusive to one buyer at a time?
  • How many loans do you close each month?

Furthermore, it would also help if you asked them about their business practices and fees. Be sure to find out if there are any hidden costs involved in the process. For example, you could be charged for a credit report or appraisal as part of a package deal, even if you choose not to order these services individually.

Also, ask them what kind of services they can provide for you. A good loan originator should be able to help you find the best loan product as well as point you in the direction of programs that meet your needs and financial situation, all without pushing one mortgage product in particular onto you.

A good way to identify if the professional you’re thinking about hiring is trying to push a certain agenda or is biased in a way that’s not in your favor is by looking at the types of loans they offer. If they answer with specific names such as Fannie Mae mortgages or VA loans, this is a good indication that they are trying to sell you particular types of mortgages instead of looking for the option that suits you best.

Final Thoughts

Loan officers are individuals who work in the banking industry and help process loans for customers. They provide advice and guidance regarding loan terms, like information about interest rates or repayment options.

It is important to know the difference between what they do and how to choose an MLO. A mortgage banker will work with banks or credit unions that offer mortgages, whereas a mortgage loan originator works directly with clients on an individual basis.


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This page last updated: March 21, 2022