What is a mortgage originator?
You are ready to buy your dream home and now is the time to start the mortgage process. This is where a mortgage originator comes in. Here’s what loan originators do and what you can expect when working with a mortgage lender.
What is a mortgage originator?
A mortgage originator, or MLO – sometimes simply referred to as a loan originator – is a person or entity that is integral to the process of mortgage origination, or the initiation of a loan. From making contact with the originator to pre-approval, to the loan application and until closing, the originator will help you go through the process as easily as possible.
Mortgage originators can work for a large bank, credit union, or other lending institution, large or small. It depends on where they work, but many are paid on commission.
You may hear the terms “mortgage loan officer” or “loan officer” (LO) used interchangeably with the mortgage issuer, but there is a slight distinction between the two: the loan, as well as to the professional you are working with on your particular loan. A “loan officer” usually describes only the professional you work with.
What does a mortgage originator do?
Mortgage originators help borrowers through the mortgage application process and loan closing. This may involve collecting your credit and financial information, assessing your needs and the loan options that are right for you, negotiating rates, and submitting your underwriting request.
It is important to note that a mortgage originator will not make the final decision on your loan application or how much to lend you. This part is left to the lender’s underwriting department, which assesses your risk as a borrower.
Before a mortgage originator can help you through the financing process, they’ll need to convince you that working with them is your best option. With this, some loan originators can feel and act like sellers. Since 2008, loan originators have been subject to more stringent state licensing and other requirements, including a mandate to act in the best interests of borrowers when possible. That said, you should never feel pressured by a loan originator to commit to a certain mortgage product without first understanding what the offer entails.
Mortgage banker vs mortgage issuer
A mortgage originator is different from a mortgage banker in that the originator will not make the decision to approve or deny a loan. In contrast, a mortgage banker can make that decision and review your application to decide how much to borrow and on what terms.
How to choose a mortgage originator
When looking for a mortgage loan, you have the flexibility 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 for a mortgage, however, can lose money. In fact, according to a study by Freddie Mac, nearly half of all homebuyers ignore the rate buying process. According to the study, you could save an average of $ 1,500 over the life of your loan by obtaining at least one additional rate quote, or on average $ 3,000 by obtaining five quotes.
Fortunately, it’s easy to compare mortgage rates and lenders with Bankrate. Take the time to find the best mortgage lender, and be sure to carefully consider the offers, including comparing the APR, fees, and any additional perks a loan originator shares with you.
If you encounter hard ground, hold on. Politely ask for a quote and let the client know that you may go back when you have considered all of your options. While declining an offer or asking for more time can be an uncomfortable conversation, your mortgage is a big financial commitment, and it’s worth being diligent.
It is also important that you can consider working well with your loan issuer. If you can’t imagine working on a major financial puzzle with the person, then he’s probably not the right fit. Ask questions about the loan originator’s communication style – will you be hearing from them regularly with status updates? – and confirm that it matches your preferences.
Ultimately, the right mortgage originator will have your best interests in mind and create a smooth application and close experience for you.