How to Startup a Mortgage Brokerage

Are you interested in starting a mortgage brokerage business? As a entrepreneurial business, the job is a rewarding one. You help business owners, families, and renters close deals on spaces and homes. A mortgage broker is a middleman that negotiates with the lender so the buyer doesn’t have to.

The pay can be great, too. The average mortgage broker makes $56,000 a year, and those who generate a lot of business can make up to $122,000 a year.

Continue reading to learn what you need to consider before starting a mortgage brokerage.

What the Business Does

Mortgage brokers find customers the best loan options. They research what the potential borrower qualifies for and use this information to choose the loan that is right for them.

The business is constantly in contact with lenders and people they know in the real estate industry. A mortgage brokerage is always in search of the best in the marketplace.

After they’ve locked onto a deal, the broker checks the paperwork with the lender to verify its legality.

The broker’s target market can be businesses, people or families, and investors. They charge clients a percentage of the mortgage loan.

Who are Mortgage Brokers?

Not everyone is fit to work in this field. It doesn’t just come down to skill, but also personality.

A good broker, such as mortgage brokerage Clopton Capital, is precise and can stand doing a ton of research, as you would for any startup business. You have to be updated on the newest loan products, call or email lenders and contacts in the industry, and narrow your search based on what the client qualifies for.

Mortgage brokers need to know how to read and calculate finances. They have to understand loans, mortgage loans, and the real estate industry.

You need to be exact with numbers. Getting the math wrong would be extremely detrimental to your business.

You should be honest with your clients and give them helpful advice. If a certain loan isn’t attainable because of a low credit score, let them know. Successful brokerages build trust with their customers.

A broker has all the appropriate licenses including pre-licensure education. They are knowledgeable about the laws on lending and other relevant laws.

How Do You Start?

At least a high school diploma or GED certificate is required to become a mortgage broker. Having three to five years of experience at a mortgage company will help you succeed in your business. You’ll have important knowledge and a professional network.

You have to get your mortgage brokerage license through the NMLS. This involves taking 20 hours of courses on ethics, law, and lending. For example, you’ll learn about home loans and legal procedures.

Next, pass the SAFE Mortgage Loan Originator Test with a score of 75% or higher.

You also need a surety bond to make sure you’ll stay within the law. The amount depends on the state. Register your established legal entity for taxes and open a bank account for your business.

Create a website for your brokerage and consider using social media. Building a presence on the internet will help bring in new clients.

Pick a software program that’s for managing brokerages, such as Pulse and Encompass. Keep branching out your professional network. Although you’ll be licensed, you have to take eight hours of classes yearly to stay updated on legality and ethics.

Legality

The 2008 SAFE Act introduced federal requirements, but there are separate state requirements, too. You should have a business bank account and credit card to protect your personal assets in case of a lawsuit.

Be aware that a Certificate of Occupancy is needed if you plan to run the business from an office. If you’re going to lease a space, make sure the landlord has a CO that’s relevant to a mortgage brokerage.

If you’re going to buy a space, you’ll need to get the CO. Check that the space meets zoning requirements and is up to code.

Have all clients sign a legal contract about terms and conditions, services, and intellectual property. This will help prevent lawsuits.

Earnings and Bills

The lender or borrower is charged between 1% and 2% of the loan. Smaller businesses usually make more money because they have less to pay for. A large business has to pay for more space and workers.

To increase profit, firms can opt to add on fees if it’s legal in their state. You can partner with businesses that deal with credit scores, real estate, and insurance.

Starting a Mortgage Brokerage

There are a number of steps to starting a mortgage brokerage. You also have legal considerations to keep track of.

However, this type of business is inexpensive. A brokerage only has to pay for labor, office space, and possibly insurance. They keep a lot of their profits.

This business is rewarding in two ways. Mortgage brokers can potentially have high earnings. They also help people get the best loans for them. Imagine helping a family buy their dream home.

Keep the above considerations in mind if you decide to become a mortgage broker, and watch your business thrive!