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Paying for a Loan Origination System (LOS)

Loan Origination System Cost - Paying for LOSAt the heart of every business is a budget. Of course, a successful mortgage broker or lender’s budget includes understanding and controlling costs. Therefore, the loan origination system cost is a key part of running a successful mortgage operation. Like any other product, price is based on your level of needs.

 

 

Loan Origination System Cost is Based on Lender Needs

 

Typically, the LOS cost comes down to a few key areas. These include a mortgage company’s need for…

  • System features
  • Third party integration
  • Add-ons
  • Customization – Yes, we customize for you!

 

So, a mortgage company’s price will vary greatly depending on the level of these needs. For instance, a small mortgage broker may only need a basic package able to run AUS, create disclosures, integrate to a few services, and obviously keep them compliant. Yet, a larger lending institution would need a system to handle multiple departments, heavy volume, and a wide variety of products. Obviously, there is a price difference between the two. The problem is finding a LOS company that can be the resource to each while keeping it affordable. Fortunately, that’s where LendingPad excels!

Mortgage Lending Type Affects Cost

As mentioned above, the size and type of the mortgage company affects cost. Typically, the lender type determines the level of loan origination system cost. Basically, mortgage companies break into 3 main groups.

Mortgage Broker

For the most part, the mortgage broker uses a LOS to prepare loans for submission to lenders. Broker needs are usually the simplest. Thus, the loan origination system cost is comprised of a monthly fee to access software and any add-on fees for the ability to access third party or other services.

Mortgage Lender

Mortgage lenders, usually correspondent lenders, are going to have more needs in a LOS. Therefore, the loan origination system cost goes up. But the LOS bells and whistles will help the mortgage lender excel. Common LOS system needs include the ability to efficiently originate, underwrite, close and ship loans. This LOS pricing structure is usually based on a “pay per application” or “per closed loan basis”.

Mortgage Institution

The mortgage institution is more complex and may include interaction with servicing or other platforms. These mortgage lenders or institutions usually have very high production volume and demand a highly customized solution. Often, this takes more than the standard out of the box lender software package. So, institution pricing varies based on the specific usage, needs, and structure of the lender / LOS contract.

 

Technology Needs Determine Loan Origination System Cost

 

While shopping for the right LOS, you will run across fixed loan origination system cost, legacy software. At first this may appear as a benefit. Although, it could lock you into something that doesn’t meet a mortgage company’s needs. Sometimes overkill. Plus, where is the customization? We promise you, most companies require at least some customization!

 

“While we were in the initial presentation with Wes Yuan at LendingPad, we asked about customizing a necessary field. Wes quickly made an additional field in their LOS and then showed how to create a custom form using the new field. Everyone else said that could take months and would costs hundreds per hour in programming charges. Wes did it in a couple of minutes in a presentation and we were even not a client yet!”

Russell S., very satisfied client

 

 

LOS Questions Mortgage Companies Should Ask Itself

  • Does the license allow enough users during peak demand?
  • Are there excessive overage charges?
  • Can the LOS software handle high demand?
  • Does the system lag or crash?
  • Are costs able to scale back when demand drops?

 

That’s where variable pricing offered by cloud based LOS solutions allow for businesses to scale. While loan origination system costs are variable, they are still predictable and stable. Why? Because they are a percent of revenue and are tied to your loan volume. Agreeing to a large, fixed contract may work during busy times. But, smart companies also know that flexibility during leaner times must be planned. Those who wisely control costs during these times are ready to pounce on opportunities later.

Cloud Based LOS vs LOS Software

Shopping around for the right loan origination system software is more than just the actual LOS sticker price. Especially, when it comes to legacy software (the big box LOS companies). There’s a lot more that comes with this form of LOS software such as additional computers and servers, physical space, plus pay for additional IT staff to keep it running smoothly. Actually, these costs may easily exceed the software price. So, do not overlook the grand scheme or it could really kill a lender’s already razor thin margins.

 

Conversely, cloud-based loan origination systems greatly reduce the need for extra staff, storage, and servers. Primarily, this is accomplished because most technology functions are handled off site and are included in your baseline pricing. Keep in mind, there could still exist some costs in these areas. Therefore, pay close attention to the details of loan origination system prices and ask questions in these areas.

Loan Origination System Pricing Options

Loan origination system software may offer a variety of pricing models. These may include:

  • One-time purchase (typically only for legacy software)
    • Limited upgrade period
    • Limited support period
  • Flat-fee subscription
  • Baseline subscription plus usage charges

 

At first glance, the one-time software purchase looks attractive. Even though the price is typically calculated based on an assumed, ongoing subscription. Yet, a usage-based LOS model could give mortgage companies additional flexibility when volume spikes or dips. Additionally, usage-based systems work especially well when add-ons are only needed on some loans. Why pay so much more and up-front for services that are not always needed?

 

Within the subscription models, you may have the option to pay in monthly or annual installments. Longer payment periods often come with a discount. While shorter payment periods can help spread out your cash outflows. That’s where a detailed conversation with a LOS representative comes in handy.

LOS Additional Features – The Bells and Whistles!

While considering a loan origination system, remember some useful (maybe required) features may come at additional cost. Additional features give mortgage companies greater flexibility to decide on levels of internal or outsourcing support.

 

For brokers, these services might include e-sign services and extended support. Yet, lenders may wish to offer third-party origination channels, have onsite training for your staff, or to add custom features. Finally, institutions may have complex and customized needs.

How Much Does Loan Origination Software Cost?

LendingPad offers transparent loan origination system pricing.  Visit our pricing page to see the current rates for brokers or lenders. If you’re an institution or need custom features, contact us to request a quote.

 

In the end, finding the right LOS system features, functionality, and cost are key to your business. So, do not take this lightly and explore your options. Remember, your sales and production team are only as good as their loan origination system they use! 

 

 

 

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