Myth # 6: LO’s are on a fixed commission so they can’t rip me off
Contrary to popular mortgage wisdom, LO’s are set on different commission rates. This is the reason why different LO’s working for the same lender quote you different rates for the same loan
Loan Officers (LOs) are a valuable asset in the mortgage industry. Their role is to help you understand mortgage terms, sort through the necessary paperwork, and help you get the best possible deal. However, it is a little-known fact that Los are set on different commission rates. This is the reason that different Los working for the same lender might quote you different rates for the same loan.
However, when sliding scale commissions come into play, this can create issues for your relationship with your LO. Below is an example rate sheet from an LO that shows the commission incentives for different rate offerings.
Even though not all lenders function this way, it is important to note that it is not unusual for Los to seek out ways to maximize their profits. Not only does this encourage bad behavior, but it also pushes the LO to sell an FHA loan and impose a higher monthly payment with mortgage insurance. Practices like this will not benefit the borrower when compared to the option of getting a conforming loan without mortgage insurance. Rather, it may only benefit the LO, who is cashing in on a higher commission level.