Loan officers, also known as mortgage loan officers (MLOs), are an important part of the real estate buying process.
These professionals help set people up with a mortgage loan to meet their needs and make sure the property transaction proceeds smoothly.
If you're interested in becoming a loan officer, keep reading to find out what sort of education and training you'll need to get started.
Becoming a Loan Officer
Loan officers are licensed in each state and must prove that they understand banking regulations related to real property transactions.
Education
A high school diploma (or the equivalent, such as a GED) is considered entry-level education for loan officers.
Many loan officers also have a bachelor's degree, which most employers prefer. Majors in business or finance are the most common.
Licensure
Mortgage loan officers must be licensed by the state where they work. Before they're eligible for licensure, they complete pre-licensure courses.
After completing pre-licensure courses, MLOs must pass the national licensure exam. There might be state exams as well.
Background Requirements
MLOs must pass a criminal background check to meet the professional standards of the National Mortgage Licensing Service (NMLS).
Additionally, the NMLS requires all MLOs to have excellent credit history and a high credit score.
Job Duties
On a daily basis, loan officers use the underwriting process to determine if individuals or businesses qualify for loans.
As part of this process, they analyze the applicant's finances and put together a loan package for the applicant based on that analysis.
The software loan officers use typically produces a recommendation based on the information provided by the applicant.
Loan officers are also salespeople for their employers, and may be involved with lead generation and identifying potential loan candidates.
Work Environment
Most loan officers work for commercial banks, savings institutions, credit unions, or direct mortgage companies.
They typically work out of an office, although some may be part of a distributed workforce or work from home part of the time.
Loan officers also travel locally quite a bit to meet clients in their homes or places of business to finalize loan paperwork.
Generally, this is a full-time job, with some loan officers working more than 40 hours a week. Some weekend work might be required.
Job Outlook
The U.S. Bureau of Labor Statistics (BLS) projects that employment of loan officers will grow 4% from 2021 to 2031.
This rate of growth is about on par with the national average for all occupations.
The increased use of artificial intelligence (AI) software and other productivity-enhancing technology may slow employment growth.
The closure of bank branches and increased use of online banking is also expected to lower the employment of new loan officers.
If you're interested in becoming a loan officer, you can follow the steps below.
Step 1: Get Your High School Diploma or the Equivalent
A high school diploma is a basic educational requirement if you want to become a loan officer.
If you didn't finish high school, an equivalent diploma, such as a GED, is also accepted by most employers.
However, if you have an equivalent diploma, it's probably a good idea to get some additional college education.
An associate degree in business or finance can also prepare you well for your job as a loan officer.
Step 2: Consider Getting a Bachelor's Degree
While a bachelor's degree isn't technically required to become a loan officer, most employers prefer it and some require it.
Loan officers typically have a degree in business, finance, accounting, or a related field.
Because loan officers have to be able to analyze the finances of applicants, a knowledge of accounting principles is important.
Getting a bachelor's degree will greatly increase your employment prospects as a loan officer.
Step 3: Complete Pre-Licensure Courses
All states require MLO licensure candidates to complete pre-licensure education on state and federal mortgage regulations.
While the specific number of hours varies, it's usually around 20. All courses must be NMLS-approved to meet this requirement.
Your state regulatory department typically has links to approved courses and programs so you can meet this requirement.
Some online coursework may also be available so you can complete this requirement more quickly and easily.
Step 4: Apply for a State Mortgage Origination License
Each state has its own application process that you'll start after you've completed your pre-licensure coursework.
Typically, you'll also need to complete a background check and credit check to ensure your eligibility for state licensure.
State licenses must be renewed every year. States also have continuing education requirements that you'll have to fulfill each year.
Continuing education requirements ensure that all licensed MLOs are up to date on any changes to regulations affecting the mortgage industry.
Step 5: Pass the SAFE MLO Test
SAFE stands for the Secure and Fair Enforcement Act. This federal law regulates mortgage loan originators and the mortgage industry.
The test consists of 120 multiple choice questions that you have 190 minutes to complete.
These questions cover basic lending principles and federal banking laws that apply to the mortgage industry.
To pass, you must score at least 75% on the test. You can retake the test if you don't pass after waiting for 30 days.
Step 6: Register with the NMLS
Your last step after you pass the SAFE MLO test is to register with the NMLS. Once you're registered, you can work as a licensed MLO.
When you register, you'll need to provide fingerprints for an FBI background check as well as authorize a credit check.
The NMLS assures that all MLOs meet the same professional standards nationwide.
An NMLS-registered MLO has strong ethics, a clean criminal background, and excellent credit history.
Learn About Becoming a Loan Officer Today
Loan officers are state-licensed professionals who typically have a bachelor's degree plus pre-licensure education. Follow the steps above to become one today.
