How To Start Your Own Mortgage Broker Business

Have you ever considered starting a mortgage broker business? As demand for home loans continues rising, mortgage brokers play an increasingly vital role connecting borrowers to lenders.

Although the housing market is cyclical, mortgages remain an essential service. With the right expertise and game plan, a mortgage brokerage can prove highly rewarding.

This comprehensive guide covers all the basics of launching your own mortgage broker business. Follow these steps to get your brokerage up and running.

Step 1: Obtain Proper Qualifications and Certifications

While specific eligibility varies by state, mortgage brokers generally require:

A college degree. Most successful brokers hold four-year degrees in business, finance, economics or related fields. This educational foundation equips you to comprehensively analyze borrowers‘ financial situations.
Mortgage broker pre-licensing courses. These classes prepare you for state and federal certification exams. They cover topics like ethics, lending regulations and loan products.
A passing score on the SAFE Mortgage Licensing Act test. The SAFE exam is a nationwide licensing requirement assessing your knowledge of mortgage regulations.

You must pass the test to conduct business in any state. Many states also mandate 20+ hours of pre-licensing education.

State-level mortgage broker licensing. Every state has its own broker licensing process to ensure consumer protection. This involves submitting an application, paying fees, meeting experience requirements and passing an exam.
Membership in the Nationwide Mortgage Licensing System (NMLS). This grants access to lenders and their loan products across state lines. You‘ll need an NMLS number to operate in most states.

Once obtaining all required licensing, the NMLS recommends new brokers partner with an experienced mentor for coaching. Consider job shadowing an established broker prior to fully launching your business.

Step 2: Understand State Licensing Requirements

Since every state regulates mortgage brokers differently, you’ll need to research individual requirements. These include:

Testing

Most states require brokers pass both federal and state-level competency exams. These test your expertise on topics like ethics, regulations, fraud prevention and lending instruments.

You must typically score at least 75% to pass. States mandate between one and three tests.

Education

Many states dictate 10-30 hours of pre-licensing education from approved providers. Coursework covers the conceived material as licensing exams.

Some states offer self-study pre-licensing programs rather than formal classes.

Surety Bonds

States require mortgage brokers carry surety bonds worth $5,000-$100,000+ depending on projected annual loan volume. These bonds protect consumers against misconduct like fraud or dishonesty.

If unable to obtain a bond due to poor credit or criminal history, you likely cannot get licensed.

Licensing Fees

Between application fees, testing fees, education expenses and bond premiums, getting licensed may cost $500-$5,000. Factor these expenses into your startup budget.

Renewal

Most states mandate license renewal every one to three years. This requires paying renewal fees and completing continuing education.

Step 3: Calculate Startup Costs

Launching any small business entails significant financial investment. With proper planning, however, costs remain manageable.

Common expenses mortgage brokerages incur include:

Licensing fees – As outlined above, these encompass exam fees, application fees, bond premiums and more. Budget $300-$5,000.

Office space – Brick-and-mortar offices build credibility, although home offices work initially. Expect to pay $400-$1,500 monthly for small commercial space.

Office equipment – At minimum, you‘ll need a computer and printer, costing around $3,000 upfront. Budget for office furniture too.

Software and tools – A CRM platform like Salesforce helps manage contacts and deals. Plan for $50-$500 monthly for a robust system.

Marketing – Print ads, digital ads and direct mailing for promotions could run $300+ monthly, sometimes much higher.

Professional services – Lawyers and accountants cost around $200 hourly. Get quotes for retainer fees.

Additional staff – Consider starting out as a sole proprietorship before hiring employees like loan officers. Budget $40,000+ for a full-time staffer.

Thus, have around $15,000-$55,000 available before launching. Some brokers bootstrap starting out while others obtain business loans or private investments.

Step 4: Build Your Brokerage’s Foundation

With licenses and capital secured, now focus on your mortgage brokerage’s fundamentals:

Craft a business plan – Thoroughly detail your startup and growth strategy, including SWOT analyses and financial projections. This drives strategic direction.

Pick a business structure – Key options include sole proprietorship, partnership, corporation and LLC. Consider liability, taxes and ease of formation.

Select bank accounts and accounting software – Keep transparent records to satisfy lenders and regulators. QuickBooks or Xero enable easy invoicing and reporting.

Set up phone, email and web presence – Establish professional digital infrastructure like a website, branded email addresses and telephone listing.

Review insurance needs – Consult attorneys and insurance professionals regarding business liability, E&O insurance, health insurance and other coverages.

Develop policies and contracts – Standard agreements protect both your business and clients. Detail terms, fees and more in writing.

Building robust systems early on supports smooth expansion down the road.

Step 5: Market Your Mortgage Broker Services

To attract clients, creative marketing is crucial. Effective options include:

Leveraging social media – Maintain active, professional pages on platforms like Facebook and LinkedIn to boost local visibility.
Networking – Attend local Chamber of Commerce and industry events to connect with fellow professionals. Ask for introductions and referrals.
Hosting seminars – Position yourself as an expert by teaching free workshops on homebuying topics.
Creating content – Blog posts, FAQs, infographics and videos build organic traffic and leads.
Purchasing leads – Buying targeted leads from sources like Zillow ads amplifies your reach.
Print/direct mail ads – Physical advertisements in local papers and real estate magazines connect with additional potential clients.

Step 6: Build Relationships With Lenders

The best mortgage brokers maintain extensive lender networks. Over time, cultivate partnerships with:

Banks
Mortgage companies
Credit unions
Private lenders

This expands the loan programs you access, helping match each borrower to their optimal financing. Sustaining strong lender ties also means more loan approvals and timely closings.

Set up one-on-one meetings with lenders to pitch your services. Highlight your expertise and discuss establishing referral partnerships. The more lenders in your network, the better.

Step 7: Prioritize Customer Service

Even with extensive marketing, most mortgage brokers rely on customer referrals for over 80% of their business. This makes excellent service crucial.

To keep clients happy and gain repeat/referred sales:

Thoroughly explain loan options so borrowers understand their decision
Meet tight deadlines so clients can lock rates
Proactively resolve documentation issues
Celebrate wins with small gifts like coffee cards

Adding personal touches builds genuine connections. Stellar service leads many clients to return for future lending needs and recommend you to friends.