What Is a Loan Officer?

There comes a time in everyone’s life where they need to finance a major purchase. It may be a car loan, a line of credit for a business, or even the cornerstone of the American dream: a home loan. In each of these situations, your first conversation about your credit and goals will probably be with a loan officer.

If you’ve never needed their services before, the idea of speaking to a loan officer can be intimidating. What is a loan officer? Do they have the sole responsibility of approving or denying dream loans? How can they help you achieve your financial goals?

For those who’ve never worked with a loan officer – or are considering making loans into a career – here’s everything you need to know about their role in lending.

Loan Officer Duties and Responsibilities

In most situations, loan officers are the first point of contact for individuals, families, and businesses who want to take out a loan from a commercial bank, credit union, online lender, or other financial institution. In addition to being a point of contact throughout the loan process, loan officers are the first professionals to evaluate the creditworthiness of an applicant.

During the loan process, loan officers collect pertinent information about applicants, based on the type of loan they want.

For example: If someone is applying for a home loan, the loan officer will gather key data about the home, the neighborhood, and the applicant’s credit report. If a family wants an auto loan, the loan officer will gather credit history information, details about the vehicle they want to purchase, and how much of the purchase the borrower can finance.

Throughout this process, the loan officer will work with the applicants to understand their financial picture and determine whether they qualify for a loan. Although loan officers don’t make the final determination, they are the first ones to evaluate applicant information, start the loan process, and recommend whether a loan will be approved or denied.

Loan Officer Salary

If you’re curious about a career in this financial field, the first question you may ask is: “How much does a loan officer make?” The answer depends on where you work and how many loans you produce in a year.

According to the job search website Glassdoor, the average loan officer salary is around $44,000 per year. This can change based on where loan officers work and what type of loans they originate. Data from Glassdoor suggests that those who work for mortgage companies tend to make more than those at commercial banks.

How to Become a Loan Officer

Although there is moderate demand for loan officers, it’s not necessarily an entry-level job. To become a loan officer, candidates will need a combination of education, licensing in the state(s) where they want to write loans, and experience in sales and customer service.

Loan Officer Education Requirements

Most companies require candidates to have a Bachelor’s Degree (or a four-year degree equivalent) from an accredited college or university. The top candidates for loan officer positions will have degrees in finance or business administration. In some situations, a candidate may become a loan officer without the education, but rather with several years of experience in a combination of retail banking, customer service, and sales.

Loan Officer Licensing Requirements

In addition to education and experience, loan officers must also be licensed in the state(s) where they plan to originate loans. Each state has different license requirements, based on the types of loans a loan officer provides.

To prepare for licensing, new loan officers must take a 20-hour class which covers state laws, lending requirements, and ethics. These classes are often offered in person and online by the American Banking Association and the Mortgage Banking Association. Individual state requirements can be found on the National Multi-State Licensing System and Registry (NMLS).

If a mortgage loan officer wants to offer home or commercial real estate loans in multiple states, they can apply for reciprocal status through the NMLS. In order to earn national recognition, new loan officers must pass the National SAFE MLO exam, agree to a criminal background check and credit check, and pay the fee to be placed on the NMLS registry.

What is the Job Satisfaction Rate for Loan Officers?

Although the job requires long hours and asks employees to juggle multiple files at a time, the job satisfaction rate for loan officers is very high. According to Mortgage Professional America magazine, one survey ranked loan officers as one of the top careers for job satisfaction. Loan officers say they are happy by not only with their work, but also with being able to help Americans make their dream purchases come true.

When You Might Need a Loan Officer’s Services

Although you may not come in contact with loan officers every day, there are certain situations where you’ll probably need their help.

At most commercial banks and credit unions, loan officers work face-to-face or over the phone with loan candidates to discuss all the lending options the institution offers. A loan officer can explain the process for most major financing choices (e.g. auto loans, home loans). When the applicant and the loan officer agree on the right product for their situation, the application process can begin.

Loan officers don’t just work with major lending lines: Depending on the bank, loan officers can help with other credit products like credit cards and personal loans. If you’re unsure which type of loan would benefit your end goals, it might be time to talk to a loan officer.

Commercial loan officers work directly with business owners to determine which kind of funding options are right for their growth. They can walk founders and executive teams through different types of loans – like commercial lines of credit, commercial mortgages, and business loans – to help them determine their best options as they expand operations.

What Loan Officers Can and Can’t Do

Although loan officers can help you find the best option for a loan, it's equally important to understand their boundaries, and what they can and cannot help you with. Before agreeing to work with any loan officer, it’s crucial to understand where the boundaries lie.

Can a Loan Officer Offer Other Services?

Under federal law, a loan officer’s primary job is to arrange financing between an applicant and a lender. While loan officers can refer their clients to other professionals (including construction contractors and realtors), they can only work on tasks related to the loan before it goes to the loan processor or underwriter.

Does a Loan Officer Charge a Commission?

Loan officers are allowed to charge a fee for their services. How that fee is paid depends on whether you work directly with a bank, lender, or independent mortgage broker. Independent brokers will usually negotiate their fees upfront to help you find the best loan options. Loan officers commissions, however, are usually paid directly by the lender.

How Can I Find a Good Loan Officer?

If you’ve never worked with a loan officer before, finding one can feel intimidating. But once you understand how loan officers work (and how they can help), it’s just a matter of narrowing down the options to find the right partner.

Start by asking within your network about those they’ve used in the past. Friends, family, and even co-workers can point you in the right direction. Once you have a shortlist, do your homework on each one: Check with your state authorities to ensure they are licensed, gain information on the companies they work with, and learn how they process loans.

When you are satisfied with their credentials, take some time to interview each loan officer and determine how they intend to work with you to finance your next big purchase. Being comfortable with their process, their fees, and what they can do to help you secure your loan can maximize your opportunity to get the best option for your lifestyle.