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How To Set Up Your Small Business As An Independent Mortgage Broker

Core Business Functions

Starting your own brokerage firm is a daring adventure. If you are not well established in the industry, you may be afraid to venture on your own. However, if you are already a successful mortgage officer, you do not need to worry since you have the prerequisite experience and understanding of the industry. You may also have a few clients here and there and good industry networks. Some of the questions you could have in mind include the kind of education you require, certification, licensing and permits, and the cost of establishing an independent mortgage brokerage firm such as this San Pedro Mortgage Broker. Below, we explore some of the requirements you may need to start as an independent mortgage broker.

Take The Pre-Licensure Mortgage Broker Training And NMLS Exam

Before licensing, you need to meet various minimum requirements. Besides basic academic requirements, you need to do a licensure program which is a 20 hr class. The class mainly targets knowledge on various state and federal requirements that pertain to the brokerage business. After the training, you need to sit the National Mortgage License System (NMLS) exam. The test referred to as the SAFE Mortgage Loan Originator Test is mandatory, and you must pass with at least a 75% score. The exam aims to test your understanding of the course material when it comes to mortgage practices, state regulations, and guidelines.

Register And Establish Your Business

After passing the exams, you need to register your brokerage firm. Registration details may differ from one state to another through some of the basics, such as business name and location may be similar. After submitting registration details, you need to choose an appropriate location for your business. You need to establish whether your state requires you to have a brick-and-mortar space or if you can establish your business online. Your startup will incur some expenses besides the exam, licensing, and bond surety. Setting up a physical office will require financing to buy office supplies and even employ admin staff. You need to factor in these expenses.

Get Your Mortgage Broker License And Surety Bond

You need to apply for licensing using your bond certificate and licensing application. Depending on the state guidelines, you may be required to answer to disclose statements or even be subjected to criminal background checks. Other information includes details about your business, such as the name, location, address, and registered agent. If the state approves your application, you are ready to start working as a licensed mortgage broker.

Different states’ laws dictate what you need to be licensed. You can check this information through the NMLS. Some of the general requirements for licensing include passing the licensing exam, paying the licensing fees, getting a bond, after which you send applications for approval.

Before licensing, you also need to get a surety bond. A mortgage broker bond or surety bond is required before licensing. The bond is meant to compensate your clients in case you break governing rules and regulations during operations. It also proves your validity to potential customers. You only pay a percentage of the surety bond depending on your credit score and financial history.  

Establish Your  Business by Building  Relationships With Partners

After licensing and establishing your business location, whether physical or online, you need to hit the ground running. You need to forge strong relationships with a lender and real estate agents. While the real estate agents will ensure you have a steady stream of clients, the lenders ensure mortgage loans are closed fast without delays. You may also consider tax consultants and financial advisors potential business partners since you will need their service, especially when your service involves buying or refinancing a home.

Market Your Business

As a new brokerage firm, you need to get your name out there. At this point, your networks and partnership with the real estate agents are very crucial since they are most likely to be the sources of your first client.  This is very key if you have not been in the field for long. If you have been working as a mortgage loan officer, it’s time to let your old clients know your new address. Since this is your business, you can introduce incentives where you pay a certain percentage for each referral.

Improve Your Skills

Get more training and education that will enable you to succeed in the business. Stay abreast with industry shifts, trends, and best practices to ensure your business is up to date.

Once you have passed the state exams, obtained business permits, and business location, you need to put in the work. Remember, this is your brainchild, and it needs to be nurtured just like any other new business.

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