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The U.S. housing market is as hot as it’s been in decades. Many people are seeking to take advantage of continued low-interest rates and take out a mortgage, but the process of applying for a mortgage is still as complex and time-consuming as ever. That’s where a mortgage broker comes in. Mortgage brokers are an important part of the U.S. mortgage market. Our guide will take you through the fundamentals of how to become a mortgage broker, from the core ideas of what a mortgage broker does to tips for running a successful mortgage broker business.
Understanding a Mortgage Broker’s Job Responsibilities
A mortgage broker (also called a mortgage loan originator) has the basic responsibility of guiding their clients through every stage of the mortgage loan application and origination process. Borrowers rely on mortgage brokers to provide them with various mortgage options in their price range and help them decide which one suits their needs.
Once the client has decided on a mortgage loan product, the broker will guide them through the rest of the process. This includes helping the client assemble their paperwork and ensuring that the borrowers follow the right procedures throughout the application, decision, and closing stages. Some mortgage brokers receive their compensation via a fee they charge to borrowers, while others get a commission from lenders on the mortgages the lenders write for the broker’s clients. Many mortgage brokers work with a consistent group of lenders who pay the brokers to connect them with pre-screened, well-qualified borrowers. In some cases, these lenders might even offer exclusive loan products through the broker.
Should You Start a Mortgage Broker Business?
Becoming a mortgage broker is a great way to start a business for many people. Earning a mortgage broker’s license gives you marketable knowledge and skills that can immediately be put to work in one of America’s most essential industries. The people best prepared to go into business as a mortgage broker have already worked in real estate or finance jobs, such as loan officers or real estate agents. If you haven’t held a job in the field, it’s still possible to become a mortgage broker. You should consider working in a mortgage broker firm, a bank, or another position where you can acquire experience in the mortgage industry first.
No matter your level of preparation, however, a mortgage broker training development program is often required for new brokers before they can apply for their license. Secondary education in a subject like business or finance can also provide an excellent springboard into a successful career as a mortgage broker.
Getting Your Mortgage Broker License
Due to the federal SAFE MLO act, mortgage brokers must be licensed by the government of the state where they do business. They also have to register with the Nationwide Multistate Licensing System (NMLS), a federal database of licensed mortgage brokers. These rules help prevent unscrupulous brokers from lying on applications, pushing clients to take a mortgage they can’t afford, or employing other unethical and illegal tactics. Getting your business license as a mortgage broker works a little differently in each state, but these are the basic steps:
- Take a pre-licensing mortgage broker training class, making sure to choose a program approved by the NMLS.
- Take and pass the SAFE Mortgage Loan Originator Test. Federal law requires mortgage broker license applicants to take this test to help ensure that the applicant is familiar with the fundamentals of working as a mortgage broker.
- Purchase a mortgage broker surety bond, also known as a mortgage bond. These bonds provide a financial guarantee that mortgage brokers will honor their contracts and obligations.
- Submit your application to your state’s mortgage broker licensing authority, along with proof of your surety bond.
- Register your mortgage broker license with the NMLS.
Once you’ve completed these steps, you’re officially licensed to operate as a mortgage broker. But turning it into an independent business requires still more work.
Starting Your Mortgage Broker Business
Starting any small business is a challenge, so start by using something like the Small Business Technology tools to develop your plan for your mortgage broker business. Think about the most important considerations for any business, including:
- Where your mortgage broker business will be located physically (even if it’s your home)
- Whether you’ll classify your mortgage broker business as a sole proprietorship or LLC
- How you’ll set your mortgage broker services apart from those offered by competitors
- Whether you’ll employ other mortgage brokers or general support employees
- The types of local and state business licenses you need to operate legally
Operating a Successful Mortgage Broker Business
When you have your license and are finally a full-fledged mortgage broker, here are a few tips to attract clients and build relationships in your mortgage broker business.
1. Market your mortgage services
Figure out who your target demographics are and how to reach them through online marketing. For most mortgage brokers, most of your clients will be people in their prime home-buying years of ages 25 through 49. But some brokers might find that specializing in certain types of clients, such as first-time buyers or retirees, gives them an edge in finding the right borrowers and the right loans.
2. Keep networking constantly
Your network of clients and partners is incredibly important to your success as a mortgage broker. Try to attend professional development seminars, community events, and industry meet-and-greets whenever you can. Nurture connections with real estate agents, lenders, your local Chamber of Commerce, and anyone else who could potentially provide you with assistance in landing clients.
3. Use technology to your advantage
The ability to leverage popular technologies is one of the things that separates successful mortgage brokers from the pack. Have you considered offering Zoom consultations to prospective clients? Do you have a social media presence? What about email marketing? All these present opportunities that a smart mortgage broker can use to make their services more accessible and appealing.