Making a career switch is often easier said than done, but a new job might be the exact type of change you need to start reaching goals in your life. Do you dread getting out of bed every morning knowing that you’re headed to a job that doesn’t inspire or fulfill you? If you’re the type of driven person who enjoys teaching and helping others in an environment where every day is different, becoming a loan officer might be just the new job you’ve been looking for. The question now: is being a loan officer a good career?

If you’ve ever bought a house, car, or other large purchase that required using a loan, then you’ve likely met and worked with a loan officer in some capacity. Loan officers also are known by other titles such as mortgage originators or mortgage bankers. While the title may differ depending on where you go, the focus of the job remains similar.

In terms of the mortgage industry, a loan officer is an individual who works for a lender—it could be a bank or a private mortgage brokerage—and assists borrowers with their loan applications. There’s much more to the job than what that sentence implies, but let’s focus on the basics first by diving into some common questions about becoming a loan officer and what you can expect in the job.

What is a mortgage loan officer?

A mortgage loan officer works with individuals or families by recommending their home loan application to lenders for approval as well as taking a leading role in the homebuying process. The loan officer, who works for a bank or other financial institution, reviews their customers’ income and other financial information to determine if they qualify for a mortgage and the amount that the mortgage will be. They play a vital role in providing assurance to a lender that their customer qualifies for a mortgage and would be able to pay it back. (Learn more by watching What is a Mortgage Loan Officer?)

Is being a loan officer hard?

Trying anything new is hard, but how difficult you find being a loan officer will depend on your strengths and your personality. If you’re a good relationship builder and a good communicator, then you can be very successful at being a loan officer.

It’s easy to assume that being a loan officer is all about understanding complex numbers, but it’s more about problem-solving than doing math. A loan officer is there to help homebuyers find the place that’s right for their budget and long-term financial goals. It’s a task that requires more work than plugging numbers into an equation. Helping people reach a major milestone in their lives is an aspect many in the industry find the most rewarding about their jobs.

Where can I work as a loan officer and are there opportunities for advancement?

You’ll typically find loan officers in a bank or credit union, but loan officers also operate out of private mortgage firms, out of real estate offices, out of their home, or out of other workspaces. Their workspace and schedule will vary depending on where you find them.

If you set out on the path to becoming a loan officer, what your job looks like and any advancement possibilities will depend on where you decide to start your career. If you decide to work at a bank, there is the potential to move up because branch managers or assistant branch managers often process mortgages. You could work your way up from a loan officer to an assistant branch manager to other higher positions. However, these types of jobs don’t offer as much flexibility with scheduling and workspace as other options.

Another type of place you could work is retail banks. These banks are large institutions focused solely on mortgages—think companies such Rocket Mortgage. With this type of company, it might be possible to set your own hours or even work from home. Within the retail bank, models are layers of loan officers and managers, meaning it’s possible to advance up the corporate ladder.

Stepping away from banks, you also could work for a mortgage brokerage firm. This type of workplace caters to loan officers who thrive at drumming up business and working as much as they want. It would also give you access to a wider range of loan products to offer to customers, as most financial institutions offer a smaller range to borrowers.

How much do loan officers make?

One of the biggest questions surrounding any job besides is being a loan officer a good career is the pay. So how much can you make as a loan officer?

Before you can answer that question, it’s important to understand the income structure for the position. It is very common for loan officers’ pay to be based on commission. Getting paid on commission means your salary is tied to the amount of product you sell. As a loan officer, you’d be paid based on the total value of loans you close each month. Some companies offer hybrid positions that include a base salary and the opportunity to earn a commission, but strictly commission-based positions are the industry norm.

Earning your income solely on commission might sound scary to a lot of people and that’s OK. If you’d rather have a little more security and consistency when it comes to the amount on your paycheck, then you’d be better suited for a hybrid position. If working fully on commission appeals to you, know that there is no minimum to what you earn, but there also is no ceiling or cap to it either if you are a hard-working hustler who enjoys what you’re doing.

As a loan officer, how much of your income is earned through commissions will depend on where you work and what you negotiate. Some companies will provide resources, such as sales leads, while others may expect you to bring in business all on your own. In fact, the most important piece that will determine how much you make as a loan officer is not in how high your commission rates are, but rather other factors such as what sales training you’ll be getting, if there is someone who can mentor you, if there are company leads available, and how well the company markets its services.

With those factors considered, what is a realistic income for a loan officer? According to an analysis by U.S. News and World Report, the median income for loan officers in 2019 was $63,000, with the top 25% of loan officers making $93,000.

So how exactly does that commission structure work in practice? First, you need to close a loan. The amount of the loan will be one factor in determining how much you get paid. The second is something called basis points. Basis points (BPS) are a unit of measure used to describe the interest rate changes in a financial instrument. One basis point is equal to 0.01%, or 0.0001, so 100 basis points equals 1%.

Let’s walk through an example using a $100,000 loan. So if a loan officer is 100% commission based—their earnings are calculated strictly on the total loan amount they bring in— they normally would get paid somewhere between 75 and 100 basis points. When you do the math, 75 basis points on a  $100,000 loan comes to $750. Similarly, 100 basis points on a $100,000 loan is $1,000. And that’s just one loan. If you close multiple loans a month, it’s possible to make a good chunk of change.

In 2020, the average home price in the United States hit $320,000. If you’re closing loans at that amount on 100% commission, you’d be clearing up to $3,200 on each transaction. Before all the dollar signs cloud your vision, remember that a loan officer’s earning potential will vary from company to company and by the position’s earning structure. If you’re in a hybrid position that includes a base salary, you would be paid a lower amount of basis points, likely around 25 BPS per loan. The loan amounts you close and your basis points are going to depend on where you work and where you’re located because it’s going to be tied to the average home sale price in your area.

Overall, being a loan officer is a very rewarding career and has the potential to pay very well.

Do I need a special degree or license to be a loan officer?

Let’s dig into the education requirements for becoming a loan officer. Firstly, you need to be at least 18 years old. You don’t need a college degree to land a job as an officer—though a bachelor’s degree is preferred. That said, a background in finance, business, or other relevant fields may help. You also don’t need any experience to get started but know that not having any will likely impact what type of role you may be offered.

Loan officer requirements do vary from state to state. In most states, you’ll need to take a licensing test in order to work as a loan officer. The exam usually follows at least 20 hours of coursework and background and credit checks. The coursework must be approved by the  Nationwide Mortgage Licensing System and Registry (NMLS).  That’s the national agency responsible for overseeing mortgage professionals in the United States. You’ll need to acquire an NMLS number from the organization in order to legally operate as a loan officer.

Once you’re licensed at a state level, you’ll need to pass another exam at the national level through NMLS. The SAFE Mortgage Loan Originator Test can be taken in person or online. It will cost $110 and test-takers are given 190 minutes to complete it. State exam and licensing fees will vary.

Want to learn more straight from a mortgage expert? Watch Is Being A Loan Officer A Good Career? with Keystone Alliance Mortgage Co-Founder Megan Marsh.