How to become a loan officer

While in high school, aspiring loan officers should take advantage of course offerings that will help them cultivate the right skill set. These include math, statistics, and economics; as well as word processing and spreadsheet software. Psychology, public speaking, and communication courses can all help to lay a solid foundation for a career that involves a lot of face-to-face interaction with clients and with other professionals such as real estate developers, builders, and agents.

At a bare minimum, a loan officer must have a high school diploma, but to secure an entry-level position with advancement potential, post-secondary education is very much encouraged in the field.

Undergraduate programs in business administration, finance, and economics are all valid choices for prospective loan officers. Regardless of the specific degree they pursue, students should look for curricula that include the following pertinent courses:

Financial Accounting
In this course students will examine the various principles of accounting and will learn how to produce different financial statements and apply measurement theories.

Business Law
In the United States, this course introduces students to American legal system. The curriculum includes foundations of business law and the federal constitution and address such topics as property rights, tort law, contract law, and commercial codes.

Financial Management
The objective of this course is to provide students with management skills and an in-depth understanding of financial principles. Capital budgeting, financial decisions, and international finance are addressed.

Principles of Macroeconomics
This course is an overview of the economy as a hole. It covers the basic principles of economic systems and highlights areas such as unemployment, inflation, the banking system, and taxation.

Business Strategy
Management process, strategy building, and planning stages are at the heart of this course.

Investment Management
This course focuses on the relationship between stock prices and the economy. It covers technical analysis methods and factors that affect decision-making.

International Finance
In this course students investigate the international aspects of investment planning. Topics covered generally include exchange-rate issues, financial decisions, currency rates, and multinational firms.

Many financial institutions prefer to hire loan officers with a background in the industry or previous related experience. This is especially true for individuals who do not have a Bachelor’s Degree and are seeking employment out of high school. Experience in customer service, sales, and banking (as a teller, for example) would be considered valuable.

However, regardless of the level of their education, newly-hired loan officers usually undergo some kind of on-the-job training specific to their employer. This is often a combination of company-sponsored formal instruction – in areas such as loan risk and loan underwriting software – and informal training.

Another option is to become an independent loan originator; in other words, a self-employed loan officer. While this may be appealing, especially for individuals seeking greater job flexibility, these ‘freelancers’ must still meet the usual education and licensing standards and get insurance as an independent broker.

Loan officers commonly specialize in one of three kinds of lending: consumer lending, commercial lending, or mortgage lending.

Consumer Loan Officers
These officers specialize in loans to people, to individual consumers. Consumers take out loans for many reasons, from buying a car to paying college tuition. For some simple consumer loans, the underwriting or evaluation process is fully automated. However, the loan officer is still needed to guide applicants through the process and to handle cases with unusual circumstances. Some institutions – usually small banks and credit unions – do not use underwriting software and instead rely on loan officers to complete the underwriting process manually.

Commercial Loan Officers
These officers specialize in loans to businesses, which often use the loans to buy equipment or inventory and upgrade or expand operations. Commercial loans frequently are larger and more complicated than other types of loans. Because companies often have complex financial structures and statements, commercial loans usually require human judgment in addition to analysis by underwriting software. Furthermore, some commercial loans are so large that no single bank will provide the entire amount requested. In these cases, loan officers may have to work with multiple banks to construct a package of loans.

Mortgage Loan Officers
These officers specialize in loans used to buy real estate (property and buildings). Mortgage loan officers, officially referred to as mortgage loan originators (MLO), arrange loans for both residential and commercial properties. Often, these officers must seek out clients, which requires developing relationships with real estate companies and other sources that can refer prospective applicants.

Within these three fields, some loan officers specialize in a particular part of the loan process:

Loan Collection Officers
These officers contact borrowers who fail to make their loan payments on time. They work with borrowers to help them find a way to keep paying off the loan. If the borrower continues to miss payments, loan officers start the process of taking away what the borrower used to secure the loan (called ‘collateral’) – often a home or car – and selling it to repay the loan.

Loan Underwriters
These officers specialize in evaluating whether a client is creditworthy. They collect, verify, and evaluate the client's financial information provided on their loan applications and then use loan underwriting software to produce recommendations.

Loan officers wishing to specialize in mortgage loans must be licensed as a mortgage loan originator (MLO). To earn the MLO license, candidates must fulfill four requirements as stipulated by the National Multi-State Licensing System (NMLS):

Pre-licensure Education (PE)
Complete 20 hours of pre-licensure NMLS-approved PE training. Many states require additional state law education.

Pass The National Test
To meet this requirement, a test score of 75% or higher is needed. Candidates who do not pass must wait 30 days before retaking the exam. After three failed attempts, a 180-day-wait period is required.

The NMLS produces a test preparation package. It includes videos addressing the test itself, the loans industry in general, and up-to-date information on laws and changes; slides from the 20-hour NMLS webinar course; several hundred practice questions and case studies; an additional 705 slides designed around the NMLS test outline; the 350-page NMLS textbook; 50 pages of exam study notes; 13 pages on the Dodd Frank Act; and additional pages dedicated to Mortgage Math.

MLO Continuing Education (CE)
To maintain their license, mortgage loan officers must complete eight hours of annual NMLS-approved CE training. Some states require one to three hours of state-specific law training as part of or in addition to this requirement.

Criminal Background Check & Credit Report Check
The final step to secure licensure involves authorizing both a criminal background check and a credit report check.

Certification is not mandatory for loan officers, but it is highly recommended. The American Bankers Association (ABA) and the Mortgage Bankers Association (MBA) are the two leading associations that offer certification in the field.

Ongoing professional development is vital to being a successful loan officer. Laws change often at both the state and the federal level.

In addition to offering professional certifications, the American Bankers Association (ABA) administers certificate programs, designed to help loan officers develop expertise in specific areas and remain up-to-date on industry regulations.