How Much Do Mortgage Lenders Make on Your Mortgage?


How much are mortgage lenders making on your loan?

One thing most consumers can agree on is that mortgages don’t come cheap.

The typical origination fee, one percent of the balance, can run into the thousands of dollars.

There may be risk-based surcharges for those with low credit scores, small down payments, or more risky properties like condominiums or manufactured homes.

Additionally, there are usually expenses for third party services like home appraisals, title insurance, escrow agents, and home inspection.

If you feel like everyone is making a lot of money buying or refinancing your home, that’s understandable.

But not necessarily true.

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Mortgage lender costs

The multitude of new mortgage regulations and consumer protections, while generally seen as a positive thing for the industry, have pushed up lender costs. Banks, brokerage houses and non-bank principals have implemented new procedures and hired more staff to comply with the new rules.

Debra Still, President of Pulte Mortgage, said in a recent presentation that in 2006 the average loan record was 302 pages long. However, the average mortgage file (book?) Is 806 pages.

This resulted in an average increase of $ 210 in the cost of obtaining a new home loan, bringing the total cost to over $ 7,700 per mortgage.

Mortgage lender benefits

By the end of 2015, increased regulation, staff costs, and loan buyouts (foreclosures, etc.) had driven lenders’ earnings per loan, according to the Mortgage Bankers Association (MBA), to $ 493 per loan.

However, as lenders better manage the new rules and introduce new technology, costs have fallen again and profits have risen – averaging $ 1,686 per loan in the second quarter of 2016.

There is certainly money on the table when shopping for a home loan. But this money is in the control of the lender, not the loan officer.

Loan officer income

According to the United States Bureau of Labor Statistics (BLS), the median salary in 2015 for loan officers of all kinds – commercial, consumer, and mortgage – was $ 63,430 per year. The lowest ten percent earned less than $ 32,870 and the highest ten percent earned more than $ 130,630.

The remuneration of loan officers varies considerably. Some receive a fixed salary, but most are paid on commission. The survey results below Inside mortgage financing show the range of commissions paid. Each basis point is equal to 1 / 100th of a percent, so 25 basis points, or basis points, equals 1/4 of a percent. That’s $ 250 for a $ 100,000 mortgage.

Check your new rate (November 24, 2021)

Work for free

Most mortgage professionals work on commission. This means they can spend hours working on loan scenarios for you, helping you improve your credit score, gathering the documentation you need, completing your application, ordering title reports, and verifying your employment. , your assets and other relevant details.

They usually don’t get paid if you decide not to buy or refinance, if the application is refused, or if you change lenders. Working for free is a big part of this business.

Mortgage commissions

Commissions vary between banks, brokerage houses and originators. What is not allowed, however, is that the commission for your loan depends on the terms of the mortgage – no bonus for giving you a higher rate, or higher fees, and no penalty for having you. reduced.

If loan officers want your business, they’ll give you the best deal their employer has approved – the mortgage bank or brokerage.

How to negotiate the best mortgage rate

When shopping for a home loan, compare offers from different competing lenders. There is usually not much to be gained by working with an individual loan officer and trying to find a better deal with them.

However, lenders are rarely allowed to slightly reduce your costs (“deviate” as they say in the industry) under certain conditions. They may be allowed to do so in order to compete with another lender’s prices, if they have a policy in place that conforms to guidelines set by the Consumer Financial Protection Bureau.

Second, no rebate can be taken from the loan officer’s commission except “to cover certain unexpected increases in estimated settlement costs”.

Fortunately, these days it’s easy to get a handful of quotes online without putting on your boxing gloves.

What are the mortgage rates today?

Today’s rates depend on the efficiency of the lender, their policy, desired profit margins, and other factors. It doesn’t matter what a lender’s policies or how much they pay their loan officers. What matters is the offer he offers you.

Check your new rate (November 24, 2021)


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