How do MLO’s make Money?

How You Can Expect to be Paid as a Mortgage Loan Officer

Before we explain how Mortgage Loan Officers (MLOs) are paid, let’s check out what you stand to earn as an MLO. Not only do Mortgage Loan Officers enjoy excellent job security, but their annual income varies depending on how many hours they dedicate to working, the mortgage rates in their area, and their commission agreement. In other words, MLOs have the unique ability to earn a hefty paycheck. As of 12/7/2021, the average salary of a Mortgage Loan Officer is $73,756 per year before commission. With a near-unlimited earning potential on the horizon, let’s break down the typical pay structure for MLOs.

Payment Structure for MLOs

Mortgage Loan Officers make their money through loan origination fees, closing costs, and servicing and selling loans. Most often, a Mortgage Loan Officer’s salary is based on commission, with compensation varying from office to office and state to state. This fee is built into the mortgage interest rate as a percentage of the loan amount. With a higher interest rate, MLOs can expect higher compensation and vice versa. Their pay also depends on the number of loans they originate and the percentage of commission they’ve negotiated.

Some Mortgage Loan Officers are paid on commission only, which is common for smaller, state-licensed Mortgage Brokers. If an MLO is hired by a bank or larger financial institution, they are often given a base salary as well as commission and benefits. Some brokerages have a limit on the dollar amount an MLO can make from a single loan, and this figure can be negotiated alongside the commission fee.

Mortgage Loan Officers are either paid “on the front” or “on the back” of the loan. When an MLO is paid “on the front”, the borrower is charged certain fees, such as settlement costs, and that money is given to the MLO. These fees are paid by the borrower either out of pocket or are incorporated into the loan. This payment structure is also called borrower-paid compensation. If MLOs are making money “on the back”, otherwise known as lender-paid compensation, then their commission comes from the bank that is selling the loan to the borrower. This charge is not seen by the borrower. When an MLO is paid “on the back”, they may market themselves and their loans as having “no out-of-pocket fees” or “no-fees”. The Mortgage Loan Officer is still making money, but it is charged on the back-end of the transaction. It’s important to note that an MLO is either paid by the lender or the borrower, but never both.

The typical MLO is paid 1% of the loan amount in commission. On a $500,000 loan, a commission of $5,000 is paid to the brokerage, and the MLO will receive the percentage they have negotiated. If the portion of the commission for the MLO is 80%, they will receive $4,000 of the $5,000 brokerage percentage fee. Depending on the MLO’s involvement in the transaction, the percentage fee can range anywhere from 20-80%.

Whether you’re a commission-based or salaried MLO, you’ll find that more experience and education will land you a higher income. So, what is the earning potential of a Mortgage Loan Officer?

Mortgage Loan Officer Earning Potential

Your earning potential as a Mortgage Loan Officer can increase as you gain experience and develop your career with additional education. Other factors that will impact your earnings as an MLO include the state in which you do business and the fluctuation of the mortgage market. A whopping 36% of full-time MLOs make above the national average salary, earning up to $181,000 per year. 

With unlimited earning potential and the chance to gain experience and education as you go, becoming a Mortgage Loan Officer can unlock a lucrative and stable career path.

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