Being a mortgage loan officer who advises borrowers on matters concerning their mortgage and finances is very important in the purchase of a home. In this article, we will go over how mortgage loan officer commissions work with particular reference to the Loan Factory.
The Basics of Mortgage Loan Officer Commissions
Most mortgage loan officers receive their income via commission, a small portion of the loan volume they contribute to the origination. This commission-based structure increases the motivation of the loan officers in order to prove their competence and secure more business. However, the commission rates may differ from one company to the other as may be determined by the employment status of the loan officer whether he/she is a W2 employee or a 1099 independent contractor.
→ Learn more: mortgage loan officer salary
General Mortgage Loan Officer Commission Structure
1. Flat Fee:
- Some companies pay a flat fee per loan closed, regardless of the loan amount.
2. Percentage of Loan Amount:
- One of the most popular formats is to pay a certain share of the loan, usually from 0.5% to 2.5%. For instance, the commission on a $300,000 loan means that a 1% commission will equal $ 3,000.
3. Tiered Commission:
- Some companies offer a tiered commission structure where the percentage increases based on the volume of loans closed. For example, the first $1 million in loans might earn a 1% commission, while amounts above that could earn 1.5%.
4. Base Salary Plus Commission:
- Few loan officers are paid a base salary and then commissions. The wage structure is fixed to ensure the employee has a steady remuneration though by adding on commissions, the money earned can be higher depending on sales made.
Loan Factory's Commission Structure
Loan Factory, a prestigious mortgage brokerage, offers a clear and attractive commission structure for its loan officers. Here’s a breakdown:
1. Experienced Loan Officers:
- 1099 Loan Officers: Independent contractors get 100% of the commissions from every closed loan after the deduction of a flat fee of $595 plus a processing fee of $500. This structure ensures that highly competent loan officers are rewarded the best they can get after deductions have been made on the full commission.
- W2 Loan Officers: W2 loan officers from Loan Factory get a 90% commission on closed loans after a $595 flat fee and processing fee of $500. In return, they are slightly compensated less than a 1099 employee but enjoy the benefits of a W2 employee.
2. New/Inexperienced Loan Officers:
- Regarding the first three transactions, whether 1099 or W2, the new loan officer gets 80% of the broker compensation for each closed transaction; however, that amount is to be reduced to $595 for the administration fee and $500 for the processing fee. This structure offers a solid foundation for building new loan officers’ experience while still giving them a great deal of commission.
Additional Support and Benefits
Loan Factory also offers additional support and benefits to its loan officers, enhancing their productivity and efficiency:
Additional Support:
- Loan Officer Assistant: Each loan officer is provided with a free Loan Officer Assistant to handle administrative work. This will give loan officers much time to focus more on client interactions and closing deals.
- Training and Development: Ongoing training and professional development assistance ensure the loan officers are familiar with the industry’s changes and enhance their performance.
- Assisted Loan Officer Program: The roles of each of the parties involved are adequately divided in the following way; The loan officers the bulk of their time on the leads while the remainder of the loan procedure will be managed by a licensed LOA. The commission split is 50% of the net commission earned by the insurance agent.
Additional Benefits:
- Health Insurance:
- Loan Factory provides contributions toward 70% of the health, dental, and vision insurance. Employees pay 30% of the costs of their coverage and 100% in respect of dependents.
- COBRA:
- The option to continue enrolled in the company health insurance plan is possible during a qualifying event which is most of the time provided when a person changes his job.
- Workers' Compensation Insurance:
- Incorporates injuries and diseases acquired at work, and ranges from treatment and payment for time off from work.
- Temporary Disability Insurance (TDI):
- For New Jersey employees, provides up to 26 weeks of partial wage replacement for non-work-related conditions.
- Bonuses:
- The probationary period is provided as regards the permanent employees in terms of a performance bonus.
- Home Purchase or Refinance Benefit:
- Employees can get a cost of $1,000 for the first home or $2,000 for any other property as well as getting any form of credit from a lender for the cost of closing.
- 401(k) and Roth IRA Plans:
- Employees can enroll in 401(k) and Roth IRA plans. Note: 401(k) matching has been discontinued as of 12/28/22.
- Insurance Opt-Out Credit:
- Employees opting out of company health insurance receive a credit of $150/month or $69.23 per bi-weekly pay period.
- Disability Insurance:
- Offers SDI benefits for Disabilities caused due to non-job-related disease or injury under California’s SDI plan.
- Domestic Violence Leave:
- Preserve health benefits when an employee goes on an approved domestic violence leave.
→ Read more: how do mortgage loan officers get paid
Factors Influencing Commission Rates
While Loan Factory’s commission structure is straightforward, several factors can influence commission rates in the broader industry:
- Loan Amount: Higher loan amounts can also lead to higher commissions because the commission depends on how much was borrowed mostly in terms of the percentage.
- Loan Type: Conventional, FHA, VA, and other kinds of loans can be concluded with different commission rates.
- Market Conditions: This is because the amount of business that can result from mortgages and therefore the earning capabilities of the loan officers depend on the economic predictors or the market conditions.
- Company Policies: Sometimes brokering can be done through brokerage houses which are the employers of the brokers, and each of the brokerage or lending institutions may have its rules with regard to commission splits, fees, and bonuses.
Conclusion
Due to the complexity of the commission structure, it is important for anyone interested in working as a mortgage loan officer to educate themselves on the different types of commission structures. A mortgage loan officer commission at Loan Factory motivates the experienced as well as the new loan officers with the opportunity to earn more within a short period of time. When accompanied by support such as having a Loan Officer Assistant and possible staff development training, Loan Factory empowers its loan officers to achieve higher income potential based on their efforts.
Whether you are a loan officer who wants to increase your income or a new graduate eager to build their career, understanding the peculiarities of the commission scheme will let you make the right decisions. Visit www.loanfactory.com or call 714-444-9999 to get more information.
