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What Does a Loan Officer Do? Benefits, Pay & How They Assist Borrowers

By

Julia Kagan

Updated October 11, 2025

Reviewed by Charles Potters

Fact checked by

Michael Logan

What Is a Loan Officer?

A loan officer is a representative of a bank, credit union, or other financial institution who assists borrowers in the application process. Loan officers are often called mortgage loan officers since that is the most complex and costly type of loan most consumers encounter. Most loan officers help consumers and small business owners with many types of loans. They're responsible for handling the application and approval process and are necessary even in online lending. Some are compensated through commissions.

Loan officers need to know about lending products, banking rules, and the documents needed for loans. Those who assist with mortgages must be licensed through the Nationwide Multistate Licensing System and Registry (NMLS).

Key Takeaways

Loan officers play a crucial role in connecting borrowers with appropriate loan products, guiding them through the application process, and assisting with paperwork for secured and unsecured loans.
They possess in-depth knowledge of lending products, industry regulations, and required documentation, making them essential resources for borrowers, especially in complex transactions like mortgages.
Loan officers help evaluate a borrower's eligibility, serving as the initial screening point to ensure an application meets the lender's criteria before proceeding.
Compensation for loan officers can include commissions, especially for mortgage loans, which might offer negotiable fees reflecting the complexity and effort involved.

Understanding the Role of a Loan Officer

The loan officer is the direct contact for most borrowers applying for a loan from a financial institution. While loans can be processed online, many consumers prefer dealing with a knowledgeable person for complex transactions. Banks keep many branches open to allow loan officers to meet potential borrowers in person.

Loan officers are knowledgeable about all of the various types of loans offered by the financial institutions they represent and can advise borrowers on the best options for their needs.

They inform potential borrowers about loan options they may qualify for. The loan officer is responsible for the initial screening process and is unlikely to proceed with an application from someone who does not meet the lender's qualifications.

Navigating the Loan Application Process

Once a borrower and a loan officer agree to proceed, the loan officer helps prepare the application. The loan officer then passes the application along to the institution’s underwriter, who assesses the creditworthiness of the potential borrower.

Once a loan is approved, the loan officer prepares the necessary documents for closing.

Important

The loan officer is responsible for collecting the appropriate closing documents for a mortgage or other loan.

Some loans require more effort. Secured loans usually need more paperwork than unsecured ones. Mortgage loans require a hefty stack of documentation due to the many federal, state, and local regulations that pertain to them. Reverse mortgages and mortgage refinancings require that the borrower receive a HUD-1 settlement statement before the closing.

Some loan officers are compensated through commissions. This commission is a prepaid charge and is often negotiable. Commission fees are usually highest for mortgage loans.

Can I Obtain a Loan Without a Loan Officer?

Even in a world of online lenders, loan officers are necessary parts of the process. Loan officers evaluate whether borrowers are trustworthy enough to handle a loan. Online banks also use loan officers to finalize transactions.

What Is a Mortgage Loan?

A mortgage loan is a secured installment loan used for a singular purpose—to purchase real estate. The loan amount covers the principal used to purchase the property, and it can include funds for paying insurance and property taxes as well.

Is a Loan Officer a Good Job?

The median salary for a loan officer was $65,740 per year in 2022. Loan officers work indoors in typically comfortable surroundings, with full benefits if employed by a bank or credit union. If you're interested in a stable, white collar job, a loan officer position may be a great choice.

The Bottom Line

A loan officer is an essential intermediary between borrowers and financial institutions, helping guide consumers through the complex loan application and approval process. The role requires expertise in understanding lending products, banking regulations, and necessary documentation to secure loans.

Loan officers play a crucial role not only in the lending process but also in advising borrowers on suitable loan products based on their financial situation. Face-to-face interactions are necessary even in a largely digitized financial world and loan officers provide personalized service that might not be fully replicated online.

A knowledgeable loan officer can significantly ease the borrowing process by providing clarity and assistance with regulatory compliance and document preparation. They may receive compensation through commissions, particularly for complex loan types like mortgage loans, offering potential financial incentives.

Article Sources

Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.

U.S. Bureau of Labor Statistics. "Occupation Outlook Handbook: Loan Officers."
Nationwide Multistate Licensing System and Registry. "Welcome to the NMLS Resource Center."
Consumer Financial Protection Bureau. "What Is a HUD-1 Settlement Statement?"
Consumer Financial Protection Bureau. "What Is a Mortgage?"

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