What is a mortgage loan originator: Key roles and responsibilities
Quick insights
- Mortgage loan originators (MLOs) are licensed professionals who help borrowers obtain mortgages and guide them through the loan process from preapproval to closing.
- Different types of MLOs include loan officers and mortgage brokers.
- Finding the right MLO matters, as a great one can save you time, money and stress; be sure to research and compare options to find the best fit for your needs.
If you’re preparing to buy or refinance a home, you might be wondering, what is a mortgage loan originator and what does a mortgage loan originator do?
In short, a little bit of everything. Not only do mortgage loan originators create your mortgage but they can also help answer questions, so you can make an informed decision about which mortgage loan meets your needs.
If you’re in the market to purchase a home or are looking to refinance, this guide is for you.
What is a mortgage loan originator?
A mortgage loan originator can be either a bank or financial institution that makes and sells mortgages, but the term can also apply to a person employed by them who helps you get a mortgage.
Generally, a mortgage loan originator is licensed specifically for the purpose of helping borrowers purchase a home or refinance an existing home loan. Mortgage loan originators (MLOs) help guide you through the process as smoothly as possible.
What does a mortgage loan originator do?
It may help to think of your mortgage loan originator as your personal concierge through the home loan process. Their main job is to help you find and secure the right mortgage for your financial situation.
Your MLO starts by understanding your finances and homeownership goals. They’ll explain different loan options, from FHA to conventional loans, and help you determine which one fits your needs. They are your main point of contact, helping you gather all the necessary documents like pay stubs, tax returns and bank statements for your application.
Once you find a home, your originator works with lenders and underwriters on your behalf. Once you’re approved for a loan, it is funded by a lender. The primary market is where these loans are initially created and funded.
Afterward, many lenders sell these loans to the secondary market, where institutions like Fannie Mae or Freddie Mac buy them. This process provides lenders with more capital to issue new loans. For homebuyers, this ensures a steady flow of mortgage options and competitive rates.
Of course, this process goes on behind the scenes, with your mortgage loan originator managing all the fine details to make sure your loan application moves smoothly toward closing.
From preapproval to getting the keys, your MLO is there to answer your questions and make the complex process of financing a home much simpler.
Types of mortgage loan originators
You might work with a few types of mortgage loan originators:
- Mortgage bankers: These professionals work directly for a specific financial institution, such as a bank or credit union. They offer mortgage products exclusively from their employer, providing a streamlined process but limited options.
- Mortgage brokers: Unlike bankers, brokers are independent and work with multiple lenders. Their role is to match borrowers with mortgage options across various institutions, offering more flexibility and choices.
The primary distinction between a mortgage banker and a broker lies in their affiliations and the range of options they provide. Mortgage bankers are tied to a single institution, which can simplify the process but may limit the variety of loan products available. In contrast, mortgage brokers act as intermediaries, leveraging relationships with multiple lenders to find the most suitable mortgage for a borrower’s unique needs.
What is the difference between an MLO and a loan officer?
In short, not much, as the two terms are often used synonymously.
Often, individual mortgage loan originators are also referred to as loan officers. You can think of them the same way you may think of a project manager. Loan officer responsibilities include confirming the information on your application and helping negotiate the mortgage program terms, which is similar, if not identical, to the work of an MLO, as you read above.
Chase itself is a mortgage loan originator, but we also have loan officers that are called Home Lending Advisors. Like mortgage loan originators, these professionals help facilitate your mortgage journey from starting a preapproval to applying and, eventually, closing.
How to find the right mortgage loan originator
A good MLO can save you time, stress, money and a whole lot of headaches. Here’s how to find a great partner for your home financing needs.
Gather referrals and do some research
Begin your search by asking for recommendations from people you trust. Your real estate agent, recently purchased-home owning friends and family are excellent sources.
Once you have a few names, take the time to look them up online. Check their professional licenses, read client reviews and see how long they’ve been in the business. This initial research helps you create a shortlist of qualified candidates.
Interview and compare your options
Don’t settle for the first person you talk to. Schedule brief interviews with at least three MLOs. During these conversations, ask about their communication style, availability and experience with buyers like you.
You can also ask more detailed questions. For example, will the MLO provide you with a prequalification or preapproval? Do they think you’ll qualify for help with your down payment?
This is also your chance to see how well you connect with them. You’ll be working closely together, so a good rapport is important. Pay attention to who listens to your needs and answers your questions clearly and patiently.
Evaluate what they have to offer
A great MLO should do more than just process paperwork; they should provide genuine value. Ask each candidate to explain the different loan options available to you and the pros and cons of each.
A trustworthy originator will be transparent about interest rates, fees and closing costs, providing you with a clear loan estimate. This is a three-page form you’ll receive after applying for a mortgage. It gives you information about estimated interest rate, monthly payment and total closing costs.
Does a loan originator cost money?
Technically, yes, a loan originator does cost money. However, loan origination fees are a standard part of closing costs.
The loan origination fee may cover the processing and administrative work done by your loan officer, processor and underwriter. The interest on your mortgage loan may help cover these fees as well. The disclosure forms you will receive as part of your mortgage application will include information on all the above.
The average loan origination fee will vary, but generally, costs around 0.5 to 1% of the total loan amount.
In summary
Mortgage loan originators are both financial institutions that create mortgages and certain individuals employed by these institutions who help facilitate the mortgage application process for borrowers. They are sometimes referred to as loan officers and are here to help you as a buyer with getting a mortgage.
As the borrower, your mortgage loan originator helps guide you from preapproval to closing. Take the time to find the right partner, since they’ll make all the difference in turning your homeownership dreams into reality.
