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.
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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.
→ Read more: How Mortgage Loan Officers Get Paid: Key Facts to Know
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:
- For Inexperienced Loan Officers, the commission split depends on employment status. 1099 Independent Contractors receive 80% of the commission . W2 Employees receive 70% of the commission . Both are subject to the deduction of administrative and processing fees.
- Loan Officers are classified as 'Inexperienced' until they have successfully closed 5 loans . Once the 5-loan threshold is met, they are eligible for the 'Experienced' commission structure.
- Deductions include a $595 administrative fee and a $500 processing fee. Additionally, on any loan where the commission exceeds $20,000, an extra fee of 10% of the amount over $20,000 will apply
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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 available support resources and optional training opportunities, 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 714-591-8143 to get more information.
→ Read more: How Much Mortgage Loan Officers Make Per Loan?
Disclaimer: Commission structures, fees, and eligibility are subject to individual Loan Officer agreements and may change based on compliance and market conditions.
Frequently Asked Questions (FAQs) of Mortgage Loan Officer Commissions
Frequently Asked Questions of Mortgage Loan Officer Commissions
