Becoming licensed as a Mortgage Loan Officer and also as RE Agent

12 Replies

Hello,

This is my first post, so I hope it complies with the rules. I've been doing a lot of digging and reading everything I can. I am about to close and acquire on my first multi-family investment property (Hartford, CT), and had a question about the licenses in the title of this post as an investment in future dealings. Having jumped into the deep end of the pool, I am exposed to all of the agents that skim off a real estate transaction: real-estate agent, loan originators, attorney/title fees, appraisers, etc. (Note: I am not disparaging the valuable work a lot of these agents do by any means; everyone deserves to charge what they believe they are worth).

 I'm wondering if I can integrate these all under one person (myself) and therefore absorb all of the costs by eliminating these middlemen. It makes sense in the plan in my mind, but I really wanted to run it by the more experienced and nuanced folks who frequent this community.

I am looking to my next deal later this year (another buy-and-hold multi-family 3-unit), and before that time I would like to become licensed as a (Residential Mortgage) Loan Originator, and as a Real Estate Agent. Supposing that my sponsoring brokers hired me as an independent contractor and gave me favorable terms such as:

Loan Originator: No fees/no salary/Split commissions: 3% of loan amount and split: 85% originator (me): 15% Broker (employer)

RE Agent: same, but 3% of sale price split 50-50 with RE Broker.

If I were to act as just the buyer's agent and loan originator, at a $300,000 sale with 25% down, I would be looking at pocketing 300000*.75*.03*.85= $5737 (loan) + 300000*.015=$4500 (RE agent) = ~$10000 or a full 3.4% of sale price.

On top of all of this, I am looking to act in these capacities entirely as my own agent - not to service others' sales. That would include originating my own loans, as well as acting as my own buyer's agent (and, eventually, selling agent).

I understand that there are significant upfront costs, which I estimate at $1000 per license just to get licensed at all, as well as 21+60 hours of classes and exams, etc. And then the hassles and costs of annual continuing education. For argument's sake let us estimate the total costs at $5000 for the first year for both.

It all seems very straightforward and something that is a no-brainier for someone who wants to start doing multiple investments per year. That 10k per transaction that I save will go into future properties and it will be a great cycle of investment.

Again, this is my first post and I wanted to find out what you all thought; your insights are invaluable.

Thanks!

I love the way your mind works:) but it is a conflict of interest for sure. You can't be involved in multiple aspects of the transaction. I'm also glad that you did disparage what all parties so as well:) it is hard work, and deals fall through all the time. There is a reason why successful people get really good at ONE thing and not try to do a little of everything. Become an expert at the one thing you like most, and be "the best." Once the world knows you are the best, you will be much more successful than the guy that (if they could) collects a commission from the lender and a real estate broker. Good thought though, I like it; it just doesn't comply with ethics and more... Someone will most likely chime in on the rules for NMLS verses sales people and brokers, and teach us all some more:)

Originally posted by @Victor Drazen :

Hello,

Loan Originator: No fees/no salary/Split commissions: 3% of loan amount and split: 85% originator (me): 15% Broker (employer)

@Jerry Padilla apparently we're overdue for some big fat raises. 

@Chris Mason

Is correct....... You are way over on the commission for your loan officer...... Also, no company will hire you to do your own loans.... There are minimums  productions that must be met or you are out the door. I went through a portfolio lender - a friend to do cash out refinances on my own property, because it is very complicated when you work for a company and try to finance your own property. It has to be upper management and changes were happening at the time. I can't touch my own loans, neither can my co-workers, it has to be someone higher up. That means you get no commission, on your personal deals. The education and licenses and staying on top of the guidelines and constant changes..... Which are hundreds of pages long for each loan product, and changes are made every couple months..... After you do the research on all that is involved, you will  see that money as well spent and a small chunk of change compared to the time and effort that is required to do it yourself. 

Originally posted by @Jerry Padilla :

@Chris M.

 I went through a portfolio lender - a friend to do cash out refinances on my own property, because it is very complicated when you work for a company and try to finance your own property. It has to be upper management and changes were happening at the time. I can't touch my own loans, neither can my co-workers, it has to be someone higher up.  

 Our software lets me pull my own credit and I can look at it for like 5 minutes before it locks me out. 

QUICK HIT THE PRINT BUTTON RUN THE AUS OH NO I DIDN'T FILL OUT THAT PART OF THE 1003 OK NOW GO RUN AUS, DU GOGOGOGO OK DU RESULTS BACK, PRINT PRINT PRINT!!! bam now I'm locked out.

Thanks for the insight, guys. I talked to a broker who gave me an estimate at my take home being 1.5% of loan amount without any desk fees or quotas, which puts the number at $3375, or maybe closer to $2500 if there are hidden fees I haven't factored in. It's still a chunk of change.

It sounded like he didn't care if I worked on my own loans, but I'd have to do more digging, since it does logically seem like nobody would go for it. On the other hand, it costs him relatively little to have me as an independent contractor working on my own loans off of which he collects a percent or two (at, I believe, the cost of paying higher premiums for counting me as an employee upon renewal of his broker license?)

But the next issue at hand is working on my own loan/being able to touch my own loan and credit. How big of an issue is this in the end? What about processing the loans only of my brother, or of my brother's LLC, for example?

As far as updating the education, I would let my knowledge of unusual loan products lapse and become well-versed in my particular markets or niches, such as multi-units to start. Edit: I realize I cannot let the knowledge lapse completely due to CE requirements.

I know it's a little unusual, but I appreciate the feedback. Sounds like it might work at a certain cost, and I would like to get to the bottom of the trade-off and see if I can circumvent it. Is there any reasons this would not work if I handled all of the loans and agencies if someone else's name was on the paperwork? And is there any conflict with being simultaneously a loan originator and RE Agent?

Thanks again.

@Victor Drazen - The bottom line is that you're not going to get any screaming deals or save any money by being a loan officer, except inasmuch as you will be better positioned to day-trade your own personal refinances.

It also takes a good year on the job full time doing loans day in and day out (mostly refis) before you are a basically seasoned and functional loan officer that can reliably handle basic and simple vanilla w2 employee 750 FICO score 20% down owner occupant purchase mortgage scenarios. 

It's not like a part time real estate agent just going "oh look at that pretty kitchen" to her friend from the hair salon and closing one or two deals a year. The loan officer job in 2016 is 5% sales, 95% operations. 

It is not 2007 any more. 

@Chris Mason

Thanks again for the input.

I definitely get that the perfect scenario I envision is pretty impossible.

But the second-best thing still sounds doable, right?

that: get license and hired, and write those vanilla loans you described for family members in the same market over and over. Someone would have to hold my hand the first few times, but I'll compensate them for that.

I guess I'm getting to be an annoying noob with naiive ambition at this point, so I'll leave it at that. I'm thinking I'll just bite the bullet and get it done. Worst case, its a couple k for an education and I'll still emerge knowing more about the mechanics of deals.

Victor, 

Just to chime in, you sound highly ambitious and that is a great thing.  Seems like the consensus on here is that becoming a loan originator is not worth the time and energy for an investor.  Why not begin by becoming a licensed agent?  I'm doing that now before getting my feet wet in investment and I have learned a lot just taking the state mandated 9 credit hours at the local community college.  

Seems like all of the comments on here were geared toward Victor as a potential loan officer trying to do his own mortgage.  What do you guys think of becoming an agent for these purposes?

Originally posted by @JB Cunningham :

Victor, 

Just to chime in, you sound highly ambitious and that is a great thing.  Seems like the consensus on here is that becoming a loan originator is not worth the time and energy for an investor.  Why not begin by becoming a licensed agent?  I'm doing that now before getting my feet wet in investment and I have learned a lot just taking the state mandated 9 credit hours at the local community college.  

Seems like all of the comments on here were geared toward Victor as a potential loan officer trying to do his own mortgage.  What do you guys think of becoming an agent for these purposes?

 I do see value there. A very solid understanding of your state's standard association of realtors residential purchase agreement, and "how the sausage is made," is huge. You can only learn about sausage making by making sausage. 

For example: the "dispute resolution" paragraph of the California Association of Realtors RPA says that unless there was a second earnest money deposit or an addendum specifying otherwise, a buyer backing out at the last minute after all contingencies have been removed can only lose at most 3% of the contract sales price. But the majority of people think you lose the entire earnest money deposit regardless of how much it is. You can exploit this.

You can make an offer look stronger, without exposing yourself to any additional risk, by making your earnest money deposit some absurd amount of money greater than 3%. Most people, including even many less wise realtors, will view that as a "stronger" offer. It's not. But they think it is. And sometimes the appearance of greater strength is what takes to get an offer accepted.

In every state, there are bound to be quirks like that in the local RPA.

My vote is to leave the financing piece to the pro's and get licensed.  With a real estate license you can do a lot more to create wealth than becoming a loan officer (unless you decide to do loans as your primary "job..") Getting a real estate license will give you a snapshot of the loan process, but more importantly will allow you to do so much more with investing, helping others, etc. Portfolio lenders or small town banks from my understanding don't pay out a ton in commission to their officers anyway. They typically offer a much higher pay rate, and a very small commission to ensure that they are providing "service" over being a "transactional" guy.. Like the car dealers that don't pay their guys to sell cars by the car, but by the hour... Same concept.. Good ideas out here. No one mentioned the conflict of interest, and I am surprised.  I bet an attorney would most likely know.. I don't think you can do both.. But even if you can, you definitely cannot write the mortgage for a deal that you are also representing the buyer (or seller) in the same transaction. I know that with certainty.  Good luck, your ambition is awesome!!

Originally posted by @Rick Santasiere :

My vote is to leave the financing piece to the pro's and get licensed.  With a real estate license you can do a lot more to create wealth than becoming a loan officer (unless you decide to do loans as your primary "job..") Getting a real estate license will give you a snapshot of the loan process, but more importantly will allow you to do so much more with investing, helping others, etc. Portfolio lenders or small town banks from my understanding don't pay out a ton in commission to their officers anyway. They typically offer a much higher pay rate, and a very small commission to ensure that they are providing "service" over being a "transactional" guy.. Like the car dealers that don't pay their guys to sell cars by the car, but by the hour... Same concept.. Good ideas out here. No one mentioned the conflict of interest, and I am surprised.  I bet an attorney would most likely know.. I don't think you can do both.. But even if you can, you definitely cannot write the mortgage for a deal that you are also representing the buyer (or seller) in the same transaction. I know that with certainty.  Good luck, your ambition is awesome!!

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