What does a mortgage loan originator do?

The term "mortgage loan originator" may be used used to describe either a financial institution that lends funds for a home loan or the professional who assists the borrower through the lending process.

Key insights

• A mortgage loan originator (MLO) helps the borrower apply for and obtain a loan.
• “MLO” is often used interchangeably with “loan officer,” but the two are slightly different.
• MLOs charge origination fees to cover administrative costs. You can try to negotiate this fee.

What is an MLO?

A mortgage loan originator is an entity or individual that helps a borrower obtain a mortgage loan and funds it. The financial institution that lends a borrower money to buy a home is considered an originator. It can be a bank, credit union or online lender).

A professional working at one of these financial institutions may also be considered a mortgage loan originator (MLO). They help borrowers through the application process and gather all necessary documents for underwriting. When you apply for a loan, you’ll most likely work with a specific individual who will help you through the process and answer your loan questions.

What mortgage loan originators do

The mortgage loan originator is responsible for assisting the borrower through the application, underwriting and the closing process. It’s essential to work with an MLO who’s knowledgeable about these processes — this will help things run smoothly up to the closing date.

An MLO may be an individual loan officer or the lending institution that originates your loan.

Your MLO can assist you by:

• Calculating payment scenarios based on different down payment amounts
• Educating you on what to expect in each step of the process
• Managing underwriter requests for documentation

Once you’ve signed all the necessary paperwork at the closing table, your MLO’s work may be complete. If you have any questions about your mortgage loan after the closing, you’ll need to contact your loan servicer (this could be your MLO, but often the servicer changes throughout the loan term).

MLO vs. loan officer

A loan officer is an individual who can offer information about various types of loans (not only mortgages). These may include personal, auto or business loans. Working with an experienced loan officer can make all the difference in simplifying the loan process — as a reviewer from Virginia pointed out after refinancing with Mr. Cooper.

Typically, an individual who is an MLO has a separate set of requirements and licensing they must obtain before they can originate mortgage loans. They specialize in mortgage loans exclusively.

How much are mortgage origination fees?

Origination fees are the administrative charges associated with your loan origination. They can range from 0.5% to 1% of the loan amount, but they tend to lean more toward 1%, according to Ashley McKenzie-Sharpe, senior mortgage planner at Fairway Independent Mortgage Corporation. Origination fees generally cover the cost of processing and underwriting the loan.

With some lenders, you may be able to negotiate the origination fee and reduce your overall costs. Borrowers with excellent credit tend to have the upper hand in these negotiations. According to McKenzie-Sharpe, “Your credit score and down payment are the two highest-weighted qualifiers.” It can’t hurt to ask for a reduction in these fees, especially if you’re a low-risk borrower.

Bottom line

A mortgage loan originator is the bank, credit union or online lender that funds a mortgage. An MLO can also refer to a person at one of these entities who helps you through the mortgage process. Your MLO is your first contact for any questions or concerns regarding the application, underwriting or closing process.

If you’re in the market for a mortgage, you’ll want to find a loan originator that fits your homebuying needs. You can ask for recommendations from your real estate agent or friends and family who have recently bought a home. It’s also a good idea to read reviews from recent borrowers to learn more about their experiences.