You know that your loan officer will make money off your loan – they are in it to make a living, right? But just how much will they make? Are you overpaying so that the loan officer can make money?
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The Average Salary
We’ll start with this nugget. The average loan officer makes just $63,650 per year, according to the Bureau of Labor Statistics. That’s not a lot considering the amount of work they do. Now a lot of this has to do with the increased regulations that came about after the housing crisis. It’s fair to say that loan officers used to make a lot more than that. Today, it’s hard for them to make as much because of the red tape and the cost the lender incurs as a result of the increased regulations.
The Average Commission
Loan officers don’t have to tell you how much they make on your loan. What the lender does have to disclose, though, is the yield spread, or the amount a bank pays a broker, assuming you use one. Loan officers themselves often make between 1% and 2% of your loan amount. If you have a $250,000 loan, the loan officer may make between $2,500 and $5,000 on your loan. But this is only if they work for a small lender where they can afford to provide higher commissions.
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If you get your mortgage from a big bank, your loan officer may make 0.5% of your loan amount. On that same $250,000 loan, this means $1,250. That’s a lot different than what a loan officer working for a small lender would make. The big bank has a lot more loan officers to pay, though, so they have to keep commissions lower.
Working on Salary
Not all loan officers work on commission though. This could work in your advantage. A loan officer that has a salary may put more focus on the loans that are the best for you rather than those that will pay them the most.
Many banks and lenders are moving towards salary for loan officers simply to make things easier. The cost of writing mortgages has increased tremendously, which means banks have a lot more bills to cover. If they can manage their loan officers by paying them a salary, they may be better off in the end.
You have the right to ask your loan officer what he will make on your mortgage. There’s no harm in asking. You can use this number to determine if it seems fair. If you feel as if the loan officer makes too much on your loan, you may want to look elsewhere. Keep in mind, though, the loan officer working on commission may bend over backward to make sure you can close the loan. The process can go either way – you have to see which option works best for you.
