How to Become a Loan Officer

Job Can Be Very Rewarding Financially

Loan officers are employees of financial institutions whose job it is to make loans to customers. Having a college degree does not hurt but it is generally not a requirement for the job.

What is needed is the ability to deal with customers, the ability to know the lending institution’s current lending guidelines and interest rates, know and follow the legal rules and regulations concerning lending and be able to evaluate a prospective borrower’s ability and willingness to repay the loan.

Most lenders generally require a high school education as a condition for employment. A college education is helpful and may help one to rise faster in the field but it is usually not a requirement.

Experience is what really counts in this field. Generally, a person desiring to become a loan officer will start in the customer service area of a financial institution such as bank teller, collections clerk (calling existing borrowers who are behind in their payments and getting them to bring their accounts current) or as a loan representative who helps applicants initiate applications for small loans such as personal loans and credit cards or even larger loans. 

Loan representatives are generally sales people who take applications and other people or computers make the decisions as to whether or not the loan will be granted and then generate the paperwork which the loan representative will then have the borrowers sign.

The loan representative may do some preliminary screening to weed out those who obviously don’t qualify, but the real decisions are made elsewhere.

Moving up the latter in this career field, we have loan officers who specialize in auto loans, home mortgage loans and commercial business loans. These, much higher paying positions, are first and foremost, sales jobs in which the loan officer is expected to actively seek and solicit borrowers for business.

In the case of automobile and home loans this means working with new and used car salesmen for referrals of car buyers. In the case of home mortgage loans this means working with real estate agents for referrals of home buyers.

With commercial business loans this involves the loan officer developing relationships with businesses to encourage them to work with the loan officer when the business needs to borrow money.

Most loan officers in this category are either paid a salary and given a quota to meet in terms of dollar volume of new loans or are paid on commission with their pay being a percentage of the loan business they generate.

In addition to sales, the loan officer must collect and evaluate information about the borrower’s ability to repay the loan and the quality of collateral (car, home, business assets being pledged as security) and determine whether or not to make the loan.

Sometimes the loan officer is empowered to make the decision as to whether or not to make the loan (in these cases the loan officer is given authority to make loans up to a certain dollar amount without approval from others) and in other cases the loan officer has to submit loans to a loan committee for approval and be prepared to argue the case for making the loan to the committee.

If you are looking for a challenging job that involves working with and helping people as well as has the potential, at the upper end of the profession, for unlimited income then this career is for you.

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28 comments

Chuck profile image

Chuck 4 years ago from Tucson, Arizona Author

Pablo - Legally, this his may or may not be a scam. I have not checked the site you mentioned or researched it so this comment is based solely on what you wrote in your comment.

Assuming this company is legitimate, it appears to me that what they are trying to do is obtain customers in volume by having lots of websites. This could be profitable for them as they would have the bulk of the revenue from the loan business while people like you were paying for their marketing. Any loans you generate through your site would give you a little income but I doubt it would be in excess of your costs.

Another possibility is that they are really in the business of selling websites and make their money through the fees they charge people like you while another company handles the lending part. Again, there is the possibility that you could make money but it would probably require considerably more marketing effort and expertise on your part.

Finally, from the sound of your comment you are not familiar with the lending industry and the job of a loan officer. My advice for you would be to try to get an entry level job, such as a teller position, in a bank where you can learn how the system operates and work your way up to a loan officer position.


pablo 4 years ago

I receive a phone call they offer me a loan agent job they tell me that i will receive a coach an my own website where i can manage the job but they were asking me to pay 300 usd and 20 usd monthly for license fee and the 20usd for other i dont know for what but i did not take the offer because it was phone call that could be fake so i ask them for the info they were calling from moneynowfunding.com honestly i donot have 300 usd at this time but been a loan agent sounds like a good idea i also want to investigate first to see if is a good option or not can you please tell if there is other companies hiring with no start up fee costs to be a loan agent where they provide a website let me know my email is pc.zamora@hotmail.com


shhnatasha 5 years ago from North Carolina

I am fortunate to get a position as a LO, that offers a small base and commission. I have lots of customer service experience...I am just trying to get a book or course that will help me to jump start my mortgage knowledge. Any tips..


Tony 5 years ago

Leah,

The hiring package and conditions of your employment are standard for the the industry. Good luck to you!!


Mendel Potok 6 years ago

Is it a similar process to become a mortgage broker, or do you need a college education?


M.A.Anwar 6 years ago

Very good and informative hub for peoples thinking about loan office job.


Leah 6 years ago

Hi Chuck, I was just offered a position as a starting loan officer at a local firm. I am still attending college and I am a little worried this job is almost to good to be true. They say I will make between 40k-60k a year starting out and they will be sending me to an extensive training first which I will not be paid for but I do not have to pay for it as well. They also tell me that I won't make money for at least the 1st 30 days as it takes that long to close a loan. Is it odd that I won't be paid for 30 days or is that normal? Maybe I am just being paranoid but your advise would really help! Thanks!


Chuck profile image

Chuck 6 years ago from Tucson, Arizona Author

Jack - thanks for your comment, however, I think that the insults directed against the writer of the previous comment and his opinions were inappropriate.

I agree with you that, if a buyer keeps a mortgage for the full 30 years the total interest paid will be considerably higher than the principal. However, you forget that there are other factors involved here:

1 if the borrower does not borrow, it will take years to save and accumulate the money needed to pay cash for a home. In the meantime, that person will have to live someplace and will have to pay rent for that place and, after years of living there and paying rent will nothing to show for the payments in terms of equity.

2 The federal and most state income tax laws are structured to allow homeowners to deduct the cost of both interest and property taxes on the dwelling from their gross income for tax purposes. This can drop them down one or more tax brackets and that is a real savings. However, if they rent, the rent will include the interest cost of the landlord's loan as well as the cost of property taxes but for Federal and most state income tax programs it will be the landlord and not the renter who gets the tax credit for this.

3 In times of inflation property values will generally increase with inflation and this will help the homeowner's net worth to at least keep up with inflation. Also, if a person has a fixed rate mortgage loan, which are common now, their monthly housing expense (other than the property tax portion) will remain fixed while rents will increase with inflation.


Jack 6 years ago

Joe, are you serious? How do u save somebody money by giving them a loan??? You mean they pay interest back that is more than the principal, and a 300K house will cost them at the end of 30 years 650K? That is what you call savings? Get a degree man, I feel sorry for this country that tellers and loan officers can do their jobs with a GED, high school education and 1.5 working cells in their brain. Yuck to all of you high school dropouts. I have an MBA and I work for a very large bank doing research. And when I see comments like, hey, the market is up, cause we closed 8 loans per month, I feel sorry for this country. Joe, community college is waiting for you buddy.


Joe 6 years ago

Come on, what are you people talking about. I work for a privately owned direct lender, and our branch alone is closing a minimum of 8 loans a month, not including our other branches. The market is starting to turn around and we are doing very very good for ourselves. The money we are all making is unbelievable and won't say a dollar amount. Yes, home values are still down, but the majority of people are begging us to do loans for them, and we find a way to get it done for them. Yes, there are some that we just can't do it for because of income or credit, but there are a lot of people out there with great numbers all around. I love my job, love the business, and when we close a loan for someone and save them thousands of dollars, there's nothing more satisfying then helping someone out and their appreciation for it.


paydayloansonline101 6 years ago

I was looking for this, i'm really into the payday loan thing in the past year, your hub helped me to take it to the next stage...


Chuck profile image

Chuck 7 years ago from Tucson, Arizona Author

Chris, thanks for your comments. I totally agree with you in all of your points but take a little exception to where you said "...except for the comment about being a tough time to enter the industry."

My point above was that, in the midst of a housing market collapse, this is not a good time for a person to simply jump in the business as a loan officer. At the end of your entry you state "...I would encourage everyone who is interested in becoming a loan officer to pick up a good book and begin the training..." and this is the point I was trying to make, namely that now is an excellent time for people to get into the industry and start training and learning the job. My main point was that such people should seek out jobs in the industry that will prepare them to become a loan officer while providing them a regular paycheck while they learn. Then, once they are prepared they can move into a market on the upturn with the skills needed to survive and prosper on a commission only income.

Thanks again for contributing your good advice.


Chris 7 years ago

I would have to agree with most of you except for the comment about being a tough time to enter the industry. Yes, the market is down and the real estate market has decreased its volume since this economic downfall, but that also means people are looking for professionals that can help guide them though the process and help to feel comfotable about buying the home of their dreams. It is also a great time to buy, so a good target is to try to get some investors that have the upfront stability and income to make purchases at much less prices than the old market value....I would encourage everyone who is interested in becoming a loan officer to pick up a good book and begin the training....This is perhaps one of the most rewarding jobs out there, and the sky is the limit when it comes to income....


shardy 7 years ago

This is actually the best time to get into this market because you have a little longer learning curve while you position yourself to be the "GO TO" person in the marketplace and when the market comes back - and it will - you're the big Dog on Campus!


shardy 7 years ago

This would actually be the best time to get in the market in any of the challenged fields - real estate agent, loan officer, etc. because the market will come back and while you're learning you can be building a list of customers and learning how to bring value to yourself and others. And when the comeback comes - and it will - you're y


loan modification 7 years ago

Though these courses are available online as well as in our cities but getting a job in this time of crunch is something ompossible task of you really can not associate yourself with some attorney or law firm or say lending organization using your contacts. But again this job prospects as a hot job are not going to be long enough I think . What do you say ?


Chuck profile image

Chuck 8 years ago from Tucson, Arizona Author

Shawn, thanks for visiting my Hub and for your comments. The only loan officer training courses that I am aware of, both traditional classroom and online, are usually offered by trade associations like the American Bankers Association (ABA) and are usually only available to employees of member lenders. There are some community colleges which offer courses in lending but you would have to search to find one. A Google search for online loan officer training courses might yield some courses of this nature.

As to realestate courses, some of which would be of help to people interested in mortgage lending, these are usually subject to regulation by the various states. The last time I checked for an online realestate broker license course for a student I discovered that, in Arizona at least, they are not allowed as the requirement is that students wishing to sit for the Arizona realtors license exam must have first completed an approved realestate training course taught in a classroom located within the borders of the state of Arizona. This is obviously intended to help limit the number of realtors by preventing out of state realtors come in, pass the test and go to work immediately.


Shawn 8 years ago

Hi, this is a very valuable hub with great piece of information, but the only piece of infomrmation missing, or I think it shold have been is the mention of some good accreddited online classes on the innternet for people like us. Do mention some names on good onnline Real Estate Courses if you can.


vrajavala profile image

vrajavala 8 years ago from Port St. Lucie

I tried it last year and was very busy. I had a very good mentor also and worked for Equity Bank, but then resigned when he went to Amerisave. Unfortunately, Amerisave would only hire me as an "on the road" employee, not an at home officer. It was quite interesting, but obviously, it was just the wrong time to enter the industry.


Chuck profile image

Chuck 8 years ago from Tucson, Arizona Author

Marc - thanks for visiting my article and for your comment. I think that you misunderstood my reply (4 comments above yours) about prospecting for clients. First of all my banking experience took place 20+ years ago when most loan officers were salaried employees (although they were often given quotas to meet) with banks or savings and loan associations. My involvement with the mortgage lending process was mainly in providing PC and mini-computer systems and programming support as well as loan underwriting, closing and secondary market sales support. I was never directly involved with customers directly.

However, I did work closely with the loan officers and still have contacts in the business. From my experience working and associating with mortgage loan officers, the primary way to get customers, then and now was develop relationships with realestate brokers in order to get referrals from them. In addition to this I know that loan officers, like other people in the sales area, actively participate in networking events, build networks with others, besides realestate brokers, such as insurance agents, who can also refer clients. In the refinance area many also resort to telephone solicitations (calling previous clients as well as cold calls) and direct mail to both previous clients and cold calls. Basically, it is all about sales.


Marc 8 years ago

Nice informative Hub, Chuck. I am involved with publishing information on home mortgages online. I was wondering since you said that your specialization as a loan officer involved sales, where do you find most of your home mortgage prospects? Is it mostly through real estate agents, or do all your leads come from them?


ychange profile image

ychange 9 years ago

Very good information. It is a pity that thay don't spend time with their clients after brokering a loan.


Chuck profile image

Chuck 9 years ago from Tucson, Arizona Author

Misha, Thanks for your comment. You are absolutely correct in that this is probably not a good time to become a loan officer, especially a mortgage loan officer. In addition to layoffs, many loan officers are paid all or mostly on commission. With housing sales already low and falling and lenders becoming very strict in approving loans there won't be many opportunities to earn commissions in the near future and the ones most likely to continue working and being paid in this industry will be those with the experience to know which potential applicants are likely to be approved and which will not as well as, and probably more important, those with extensive contacts who can refer the dwindling pool of borrowers to them.

However, this downturn, like others in the past, will not last forever and the market for loans and loan officers will improve. Those who still want to get into the field should look for a job with a bank or other large lending organization in their loan servicing department, especially the collections division of that department. Not only are these jobs usually salary rather than commission based but they are also great positions in which to learn the business. When the market returns, and it will, such people will be in a position to fill loan officer positions as they quickly become available.

Thanks again for visiting and for your comment. Chuck


Misha profile image

Misha 9 years ago from DC Area

Considering what is happening in the industry right now, I wouldn't want to enter it just yet. I would expect serious job cuts for a coming couple of years at least, and people with less experience are mosy vulnerable...


Chuck profile image

Chuck 9 years ago from Tucson, Arizona Author

Kelsea, thank you for visiting my hub and for your comment. The best way to become a loan officer is to get a job in a bank. If you have a college degree you can start as a management trainee and apply for the loan department where you will probably begin in an area like collections or loan servicing. If you don't have a degree you can apply for a job in a bank as a teller or entry level position in another department (although teller would probably be best as that is a customer service job with customer contact and customer service and dealing with customers is a big part of a loan officer's job.

Whether you have a college degree or not, take advantage of the training the bank will offer (free but will have to be done on your own time) through the American Institute of Banking as this will both prepare you for loan officer and other positions in the organization (or another as you may want to continue looking for loan officer jobs outside as well) as well as show your current and potential future employers that you are a self-starter and have ambition. These are qualities they like in all employees especially in loan officer positions as you will be expected to go out and bring business in rather than simply waiting for customers to come in and apply for loans (finding customers is very critical in areas like mortgage banking and other specialty lending areas where your pay will be commission based). Good luck.


gpower2 profile image

gpower2 9 years ago from Newport Beach

Informative HUB. I have been in the mortgage business for a number of years and it can be challenging (especially these days.) It is also a very rewarding career in the way of helping people make sound financial decisions and advising them about one of the most important investments in their lives.


kelsea 9 years ago

I am just looking for some one to help me get started on how to be a loan officer and the different programs that are out there. I live in washington if you can answer any of these questions


markion 9 years ago from London

Informative Hub.. it does seem like a rewarding career but also seems as though it requires hard work!

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