Loan Originator vs. Underwriter: What Are the Differences?
Learn about the two careers and review some of the similarities and differences between them.
A loan originator and an underwriter are both professionals in the financial industry. They work with borrowers to help them obtain loans and with lenders to ensure that the loans are made. Though they share some similarities, there are several key differences between these two positions. In this article, we discuss the job duties, education requirements and salary potential for loan originators and underwriters. We also provide helpful tips for those interested in pursuing a career in this field.
What is a Loan Originator?
Loan Originators work in the mortgage industry to help people obtain loans to buy property. They work with potential borrowers to collect the necessary documentation to apply for a loan, such as tax returns, pay stubs and bank statements. Loan Originators also help borrowers understand the different types of loans available and choose the one that best suits their needs. They typically work for banks, credit unions or mortgage companies. Some Loan Originators are self-employed and work as independent contractors.
What is an Underwriter?
Underwriters are responsible for assessing the risk of insuring a loan or investment and setting the premium that will be charged to the borrower or investor. They review loan applications and supporting documentation to determine whether the loan meets the lender’s guidelines. Underwriters also use their judgment to assess the borrower’s ability to repay the loan. If the underwriter approves the loan, they will set the premium that the borrower will be charged. If the underwriter denies the loan, they will explain the reasons for the denial to the borrower.
Loan Originator vs. Underwriter
Here are the main differences between a loan originator and an underwriter.
Job Duties
Underwriters and loan originators have different duties, although the tasks can overlap. Loan originators meet with prospective borrowers to determine their financial situation and evaluate whether they’re a good candidate for a loan. Then, they take that information and create a loan application.
Underwriters review applications submitted by loan originators and perform due diligence on each one. They may use software programs to help them make decisions about each application. Depending on the underwriting standards of the institution where they work, underwriters may need to approve every application or only certain ones.
Job Requirements
Loan originators typically need at least a bachelor’s degree in business, finance or another related field. Some employers prefer candidates to have a master’s degree as well. Additionally, loan originators must be licensed by the Nationwide Mortgage Licensing System (NMLS). The NMLS offers training courses that teach professionals how to originate loans and comply with state and federal regulations.
Underwriters also need at least a bachelor’s degree, although some employers prefer candidates to have a master’s degree as well. In addition to their educational requirements, underwriters must be licensed by the NMLS. The NMLS offers training courses that teach professionals how to underwrite loans and comply with state and federal regulations.
Work Environment
Loan originators work in a variety of environments, depending on the type of institution they work for. For example, some loan originators may work for banks or credit unions that have brick-and-mortar locations where customers can visit to apply for loans. Other loan originators may work for online lenders who only provide services over the internet.
Underwriters typically work in an office environment and spend most of their time at a desk reviewing applications. Underwriters often work full time during regular business hours, but it’s possible that underwriters also work overtime when there is a rush of applications to review.
Skills
Both loan originators and underwriters need to have excellent customer service skills. Loan originators work with potential borrowers to help them understand their options and choose a loan that meets their needs. Underwriters review loan applications to determine whether or not the borrower is eligible for the loan. In both cases, strong communication skills are necessary to explain complex financial concepts to customers and build relationships of trust.
Both loan originators and underwriters also need to be detail-oriented and have strong analytical skills. Loan originators need to be able to pay close attention to the details of each customer’s financial situation to ensure they are matching them with the right loan. Underwriters need to be able to carefully review loan applications and supporting documentation to identify any risks in approving the loan.
Loan originators benefit from having sales skills to help them market loans to potential borrowers and close deals. Underwriters do not typically need sales skills as they are not responsible for marketing loans. However, they can benefit from having negotiation skills to help them reach agreements with loan originators on loan terms.
Salary
Loan originators can earn an average salary of $99,129 per year, while underwriters can earn an average salary of $68,337 per year. Both of these average salaries may vary depending on the size of the company at which you work, location of your job and the level of experience you have prior to pursuing either position.