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There’s a certain point in the homebuying process when things get personal.
Like, really personal.
This is when the mortgage loan originator steps in. Though the term can be used broadly to refer to any mortgage-lending entity, it’s also the job title of the person who evaluates your financial situation — and determines exactly how much money you’re approved to borrow.
“I see everything,” says Ashleigh Thomas, a mortgage loan originator (also known as an MLO, loan officer, or LO) based in Corpus Christi, Texas. That may include your bank statements, pay stubs, tax returns, credit reports, and information about any other assets or debts in your name. Once, Thomas spotted a fraudulent account on her client’s credit report that he didn’t even know about. A loan originator will also investigate where your down payment funds are coming from and verify each of your sources of income.
“I’m gonna ask a lot of probing questions,” says Thomas. “Of course I’ll be sweet about it, but I have to know.”
Your ability to have an honest conversation with your mortgage loan originator will determine your success in buying a home that suits your budget. Ultimately, experts say, your loan officer’s goal should be to inform you about the best mortgage products available to you based on your individual circumstances.
That’s why it’s crucial to work with the right mortgage loan originator. We talked to originators and independent financial advisors about what to look for when you’re looking or a loan.
What Is a Mortgage Loan Originator?
Mortgage loan originator, or MLO, is often used to describe a professional at a brokerage or bank who guides you through the process of getting a mortgage. Whether it’s a refinance or a new home purchase, your MLO is your main point of contact with your lender.
Any mortgage loan originator who works for a lender or broker is required to be licensed by their state, according to a 2008 federal law. Those who work for banks are not required to obtain a license, but they still must register as a mortgage loan originator. You can check your MLO’s credentials using the Nationwide Mortgage Licensing System and Registry, or NMLS.
You may also hear the term mortgage loan originator used more generally to refer to the institution that issues your mortgage, or to any number of underwriters or loan officers at a bank or lending company who work on your loan. A mortgage broker, on the other hand, doesn’t issue a mortgage but instead acts as a liaison between you and your lender.
What Does a Mortgage Loan Originator Do?
A mortgage loan originator walks you through the mortgage process from start to finish.
Their first job is to get you a pre-approval letter. This is a document from your lender that specifies how much money you can afford to borrow. With that in hand, you’ll be poised to make an offer on a home within that price range.
To determine your pre-approval amount, an originator will do a forensic scan of your finances, including a hard credit check. Taking into account your income, assets, debts, and any other assets or liabilities, they will give you a dollar figure that represents the maximum you can afford to borrow.
And they’ll need to see some proof. “I don’t just take their word for it. I need to actually see the documents,” says Nadia Alcide, a mortgage loan originator who works primarily in Hollywood, Florida. While the process might be overwhelming, she says, it’s necessary to ensure the bank is lending responsibly.
“I just want them to be able to pay their mortgage, at the end of the day,” says Alcide.
You don’t have to spend as much as your lender authorizes you to. In fact, most people will see a pre-approval amount much greater than what they should actually borrow, says Walda Yon, chief of housing programs for the Latino Economic Development Center. Make your own budget beforehand, suggests Yon, comparing your income with your bills and debts. Use a mortgage calculator to estimate monthly payments, and enter different mortgage lengths and interest rates to see how changes in terms might affect your costs.
A good mortgage loan originator will be able to walk you through your options, experts say. For example, an originator can help you determine whether a conventional mortgage is right for you, or whether a government-backed mortgage such as a VA, FHA, or USDA loan might be a better fit. Each of these products comes with different fees and requirements, such as down payment minimums or private mortgage insurance. Your originator should also know about any down payment assistance programs available in your area, especially if you’re a first-time homebuyer.
Once your offer on a home is accepted, your mortgage loan originator will order an appraisal to make sure the property is actually worth what you plan to borrow. They will also order the title and other paperwork for the home and be your point of contact as your loan moves through mortgage underwriting and the closing process.
“I pretty much stay in touch with my clients from beginning to end,” says Alcide.
How to Find a Mortgage Loan Originator
There are two things you should do before you choose a mortgage loan originator, housing experts say.
First, evaluate your budget and decide whether you’re financially ready to buy a home. Your housing costs shouldn’t exceed 30% of your monthly take-home pay, says financial journalist and NextAdvisor contributing editor Farnoosh Torabi. She also recommends building six months of emergency savings separate from your down payment and closing costs.
By the time you talk to lenders, you should know how much you can afford, says Yon, who is part of a network of free housing counselors sponsored by the U.S. Department of Housing and Urban Development (HUD). For first-time homebuyers in particular, Yon recommends meeting with a HUD counselor to go over your finances. “We’re a reality check,” she says.
Next, request quotes from at least three lenders. This will allow you to compare their interest rates and fees. Each of the quotes will require a hard credit check, but credit bureaus will not penalize you for multiple credit checks as long as they occur within a 30-day period.
When you’re looking for quotes, ask for recommendations. Many real estate agents have relationships with lenders and loan originators, so they’ll often refer you to one. This can be a convenient option, especially in cases where you’ve built trust with your real estate agent. However, you’re not obliged to follow your agent’s recommendation. “You are 100% allowed to go somewhere else and find another one,” says Thomas. “Your real estate agent can’t tell you who to use and who not to use.”
You can also ask any friends or family members who have bought a home whether they had a positive experience working with a lender. If you’re working with a HUD-approved housing counselor, they may be able to give you a recommendation as well.
What to Look for in a Mortgage Loan Originator
Ultimately, you want an originator who gives you the best deal. But other qualities, such as relevant experience and the ability to communicate clearly, are important too.
A Good Rate, and Low Fees
You can see exactly what your lender will charge in their loan estimate, a standardized three-page document that outlines the estimated costs of a prospective mortgage.
You’ll need to have a home under contract already to get that loan estimate. Still, there are questions you can ask your originator in advance, according to Jennifer Beeston, a mortgage educator who in 2020 ranked among the top mortgage originators in the country by dollar volume.
Lenders should be able to give you an estimated rate before they give you an official loan estimate or even a pre-approval letter, Beeston recently told NextAdvisor. And if they ask for any upfront fees before you get a loan estimate, that’s a big red flag. “Be afraid,” Beeston said.
Once you get a loan estimate from at least three lenders, compare the interest rates as well as the fees listed in Section A of page 2. Just like the interest rate, these fees will vary from lender to lender. Look for an “origination fee,” which is a fee imposed by the lender for processing the loan. Also check to see whether your lender is charging discount points, which are extra upfront costs that can reduce your interest rate.
Knowledge of Your Market
It’s vital that your mortgage loan originator knows your real estate market, says Yon. Many municipalities offer down payment or assistance programs, especially for first-time buyers. Others offer tax incentives or discounts on closing costs. “But if the loan originator doesn’t know about that, that won’t apply,” says Yon. Besides, she says, a lender who is “community-oriented” will be more invested in your long-term success as a homeowner. “They’re going to take the time to give you advice,” says Yon.
Flexibility and Tech-Savviness
The real estate market is hotter than ever in 2021. Heading into homebuying season, 30-year mortgage interest rates are near rock bottom and inventory is at an all-time low, according to the National Association of Realtors. More than half of Redfin buyers last year bought a house without ever visiting it in person, according to the real estate listing site.
So being quick and savvy is more important than ever. Look for a mortgage originator who leverages technology to make the process easier. For example, Thomas has an app that allows her to pre-approve a mortgage from her phone. She can scan and upload documents and send them for signature using the DocuSign app. In a competitive market, that could give an important edge. “I’ve done it in two hours,” Thomas says of the pre-approval process.
Make sure your originator suits your schedule, too. If you tend to look at homes on nights and weekends, you want a lender who will be available during those times as well.
The mortgage process can be complicated and overwhelming, and the stakes are high. You want to work with an originator who you feel comfortable talking with. They should understand your goals and give you the information you need to make a good decision. If you feel rushed or like you’re not being heard, that’s a sign of a bad fit, according to experts.
When Alcide meets with a new client, she says she lets them have the floor. “It’s really me listening to them: asking them their goals, what their intention is for buying. If they tell me that, then I can meet them there, and it feels like a more comfortable process,” she says.
“You have to vibe,” says Thomas. “If you don’t like your [loan officer], go somewhere else.”