A mortgage loan originator, or MLO, is a mortgage consultant who helps a prospective home buyer get the mortgage they need for a real estate transaction. They work with the borrower from the beginning of the transaction to the end, from the initial consultation and application through approval and the closing process. In the eyes of lenders, the originator is responsible for initiating the loan process. An MLO can be a lending company, mortgage consultant/broker like Vic, or loan officer.
Loan officers are employees of lenders, like banks and credit unions, or mortgage brokers. In the case of a one-person mortgage broker firm, the person is both the broker and the loan officer.
If a consumer tries to buy or refinance a home through a bank or credit union, the first step is to a loan officer who works there. A bank loan officer can only offer programs and mortgage rates that their institution makes available. A loan officer gets paid by the bank either by salary with standard benefits or through a commission for sales.
In contrast, a mortgage consultant works on a borrower’s behalf to find the best loan programs and rates available from multiple lenders.
Mortgage consultants, AKA mortgage brokers, are finance professionals who help people buy homes and investment properties with financing that fits their circumstances. The consultant’s relationship with buyers includes:
- helping buyers understand the arbitrary rules of mortgage lending
- presenting buyers with realistic buying options
- advising them on making a choice that fits their needs and financial resources
Knowledge: In general, the mortgage consultant needs in-depth knowledge about the mortgage industry, enabling them to:
- provide accurate current mortgage rate and product information to buyers
- communicate effectively with lenders
- help clients get approved through inside knowledge of lender practices
- manage loan documents, the loan process, and closing
Skills: A good mortgage consultant will excel and make their clients happy if they have skills in all of these areas:
- Communication — the ability to listen to clients, understand their needs, and explain mortgage details clearly
- Social — empathy and respect for clients during stressful transactions
- Math — the ability to compile complicated data and interpret it to compare loan offerings
- Detail — accurately tracking calculations and statuses for many clients concurrently
- Decision-making — using reason and experience to help clients choose an option they will be happy with
- Desire for mutual success — using their experience and skills to help a client close on a loan
A real estate broker is a licensed real estate agent who has additional education earning a broker license. There are three types of real estate brokers:
- Associate brokers, who have broker licenses but choose to work under another broker
- Managing brokers, who manage broker offices along with training and mentoring new agents
- Principal or designated brokers, who supervise real estate agent transactions to make sure they comply with state and national laws
Real estate brokers get paid either through commissions from their own deals or through a share of the commissions earned by real estate agents who work under them.
Real estate agents are paid by commission on a percentage basis for their work for real estate brokers or real estate agencies. Agents share their commission between the buyer’s agent, the listing agent, and the agencies those agents work for.
According to Investopedia, a typical commission split might look like this for the sale of a $200,000 property with a 6% commission:
- Listing agent: 1.5% ($3,000)
- Buyer’s agent: 1.5% ($3,000)
- Listing agent’s broker: 1.5% ($3,000)
- Buyer’s agent’s broker: 1.5% ($3,000)
Buying agents are real estate agents who represent buyers during the purchase of a property. Their duties include:
- helping buyers find properties that meet their wish list
- finding properties in the buyer’s price range
- arranging home appraisals and inspections
- negotiating purchase terms
- helping buyers submit and file the purchase documents
Listing agents are real estate agents who represent sellers during the sale of a property. Listings agents’ duties include:
- helping owners determine the appropriate listing price
- advising the owner about updates that will increase the appeal of the property to buyers
- arranging for home staging
- hosting open house events
- marketing the home on the Multiple Listing Service (MLS), on websites, social media, and other channels
- negotiating on the seller’s behalf on the sales price
- helping sellers submit and file the sale documents
Real estate agents are licensed to help people buy, sell, and rent real estate. Agents put buyers and sellers together by guiding and organizing transactions between them. Each state has its own requirements for licensing. Typic responsibilities are:
- Following the local market
- Finding and showing properties to potential buyers
- Negotiating as liaison between buyer and seller
Real estate agents are paid a commission from the sale of properties.
A Realtor is a licensed real estate salesperson who belongs to the National Association of Realtors. Realtors are held to a higher ethical standard than licensed agents and must adhere to a Code of Ethics requiring them to make their clients’ best interests their top priority.
When you’re required to have Private Mortgage Insurance on your loan, the lender will require the property taxes and home owner’s insurance to be collected monthly as part of the total mortgage payment. The loan servicer will make the bi-annual property tax and annual home owner’s insurance payments on the borrower’s behalf when due.
In order to start this process, you will have to set up an Escrow/Impound Account (both terms for the same exact thing in California) with the new lender/servicer so that you can pay monthly property taxes and home owner’s insurance as part of the total monthly mortgage payments.
PMI is a Recurring Closing Cost or Prepaid Item. When the loan amount is greater than 80% of the property price/value the lender requires you to have insurance on the loan. This protects the lender in case something happens and the mortgage goes unpaid. The lender will then be able to recoup their losses.
Insurance is one of the Recurring Closing Costs or Prepaid Items paid in your closing costs. This insurance includes Home Owner’s Insurance/Fire Insurance/Hazard Insurance (three terms for the same exact thing) and in some cases, Private Mortgage Insurance (PMI).
Prepaid Items are costs that are associated with the maintenance of the borrower’s loan and normal property maintenance, regular recurring costs that are paid monthly or annually. These costs include normal interest due on the loan, property taxes that are paid twice a year or monthly, and insurance.
There are two different categories of closing costs. Recurring Closing Costs, also called Prepaid Items, and Non-Recurring Closing Costs, NRCCs.
Closing costs are required fees that are paid at the closing of a real estate transaction. The point in time called the “closing” is when the title to the property is conveyed to the buyer. Closing costs are paid by either the buyer or the seller.
Many people worry about how having your credit run for a pre-approval, sometimes called a “hard check,” affects your credit score. Hard checks occur when you apply for a mortgage or auto loan. Credit card applications, student loans, personal loans, and apartment rental applications also trigger hard checks. In general, a hard credit check may lower your score around 5 points. Many big lenders will automatically re-run a credit check every 90 days, but we don’t want that.
However, your credit can be checked multiple times for a single purpose (i.e., applying multiple times for a car loan) in a single 30-day window, and that only counts as one incidence.
Note: A “soft check” is when you check your own credit, or if a potential employer accesses your credit profile as part of a background check.
A pre-approval letter is good for 90 days from the time it’s run. Many big lenders will automatically re-run a credit check every 90 days, but we don’t want that.
I have hands-on relationship with my clients. I stay in communication with you, and I will check in with you throughout the period of time that you are looking for a property. If you tell me your data hasn’t changed, and you can provide updated documentation supporting reported income and assets, I will keep issuing a pre-approval letter until you get into contract. We may need to re-run your credit after the 90 days has expired, but not always.
Quicken Loans, Rocket Mortgage, the fill-in-the-blanks form on your bank’s online banking interface, all of these online loan approval systems are designed to benefit them, not you. They want to gather your data and determine if you are, on the surface, a profitable lead and they won’t look beyond that.
If your numbers alone are not pristine, you will not get anywhere with them. And if you do have good numbers, they are not going to shop your profile to 100 different lenders to determine for the best loan for you. That’s what I do. They will offer you whatever loan product they have. Also, none of them will generate a pre-approval letter.
Independent mortgage brokers like me are motivated in a different way. We build a relationship with you. I help you get into the position you need to be to buy the property you want. I have a vested interest in your success, and I hold your hand along the way. I shepherd the process through from start to finish, with care.