What Percentage of a Loan Does a Loan Originator Get?

Definition

A loan originator, also referred to as a loan officer, documents your application information, determines the best mortgage for your situation and follows the process to approval. This position also collects all necessary paperwork from you to aid the underwriter in analyzing your qualifications. Compensation is almost exclusively by commission, based on the amount and type of mortgage sold. Origination charges, normally between 1 and 2.5 percent, are usually paid by the borrower based on the principal amount of the loan.

Loan Originator Percentage

Loan originators are paid a fee for the work accomplished to successfully close your mortgage. Unless they own the brokerage, loan officers must split this fee with the broker, depending on their agreement. Each may receive half of the commission or some other arrangement can be used. The percent of the fee is based on the loan amount, interest rate, down payment, the borrower's credit rating and other factors. Typically, the loan origination fee charged is less on larger mortgages.

Truth in Lending Act

The Federal Reserve System's Truth in Lending Act, or TILA, requires loan officers to disclose pertinent information to borrowers. Sometimes mortgage jargon can be difficult to understand and remember, so TILA regulations help applicants know the details of proposed loans to compare the same types and choose the least expensive lender. In addition, TILA Regulation Z mandates strict guidelines on how loan originators are paid. For example, the origination fee may not be based on the type of loan product sold. In the past, lenders offered loan officers special incentives to push particular types of high-return products. Now, originators must market the loan that is best for the consumer.

Real Estate Settlement Procedures Act

The Consumer Financial Protection Bureau oversees the Real Estate Settlement Procedures Act, which requires lenders to give the borrower disclosure forms after submission of an application and upon closing of the loan. The Good Faith Estimate helps consumers understand the amount of the loan origination fee and other charges before they commit to the mortgage. At the close, the Settlement Statement specifies the breakdown of the closing costs. The loan origination fee on the closing statement should match the amount disclosed at the time of application.