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Starting a Mortgage Brokerage Business – A Complete Guide

Do you want to start a mortgage brokerage business? If YES, here is a complete guide to starting a mortgage brokerage business with NO money and no experience.

Okay, so we have provided you an in-depth sample mortgage brokerage business plan template. We also took it further by analyzing and drafting a sample mortgage brokerage marketing plan backed up by actionable guerrilla marketing ideas for mortgage brokerage businesses. In this article, we will be considering all the requirements for starting a mortgage brokerage business. So put on your entrepreneurial hat and let’s proceed.

Why Start a Mortgage Brokerage Business?

Shelter remains one of the topmost needs of human beings. People can go all the way to ensure that they have a place to rest their head after a hard day’s work. No doubt, it might be a herculean task for the average person, especially those in the lower class and even the middle class of the society to save up the required money needed to purchase their own apartment. But the good news is that with Mortgage brokerage firms, you are able buy your desired property and pay at your convenience over a long period of time.

In reality, if you must be successful with your Mortgage Brokerage business, you must expand your network and build a thriving relationship with both key players in the Real Estate Industry and banks. This is so because as a Mortgage brokerage operator, you will definitely depend on the corporation of both your bank and real estate firms to be able to make profit since all you get is commissions from the loan payments.

It is important to note at this juncture that if you are not careful with this kind of business, you might land yourself in trouble and be sued. That is why you must follow due process before securing a loan for your client. If you have clients that are always defaulting with their monthly payments, then you stand the chance of running out of business in no distant time. To secure yourself from any embarrassment, it is important that you buy liability insurance for your Mortgage Brokerage Business.

So, if you have done the required feasibility studies and market research, then you might want to venture into this business.

Starting a Mortgage Brokerage Business – A Complete Guide

  • Industry Overview

Mortgage Brokerage firms are established with the sole aim of providing a convenient platform in form of long term loan to those who want to buy their own property. With the loan you get from the bank via a mortgage brokerage firm, you can finance any property of your choice as long as you pass the screening and evaluation process. The screening and evaluation is put in place to ensure that due process is followed before issuing a loan and the person receiving the loan must be credit worthy.

In other words, Mortgage Brokerage firms stand as the middle men between a Bank and Mortgage bank as the case may be and the individual or organization seeking to buy a property. Anybody or group of investors may start and own a mortgage brokerage firm as long as they meet the requirements for establishing such organization in the country they intend establishing the business.

The Mortgage Brokerage Services industry is indeed in a mature stage of its growth. The industry is characterized by growth in line with the overall outlook of the economy, consolidation from the largest players in the industry and wholehearted market acceptance of the industry products and services. The Mortgage Brokerage services line of business will continue to be in high demand by business establishments and individuals in the United States, most especially as the number of businesses and the need for accommodation increases.

The Mortgage Brokerage Services industry is indeed a major sector of the economy of the United States of America which generates well over $8 billion annually from more than 12,609 registered and licensed mortgage brokerage firms scattered all around the United States of America.

The industry is responsible for the employment of well over 44,756 people. Experts project the mortgage brokerage services industry to grow at a 6.3 percent annual rate. The establishments (online brokerage firms) in this industry that have a dominant market share in the United States of America are; Zillow and Lending Tree.

One thing is certain about starting a Mortgage Brokerage Services business, if you are able to conduct your market research and feasibility studies, you are likely not going to struggle to secure clients because there are always clients all across the United States who would need your services from time to time.

The fact that mortgage brokerage firms can easily be found in cities in the United States of America does not in any way make the industry to be over saturated, and the fact that there are people out there who would always need loan from time to time to sort out property related deals makes the business ever green.

Over and above, starting a mortgage brokerage firm requires professionalism and a good grasp of the financial and real estate market. Besides, you would need to get the required certifications and licenses and also meet the standard capitalization for such business before you can be allowed to start a mortgage brokerage firm in the United States; the industry is heavily regulated to guide against fraud and criminality.

Starting a Mortgage Brokerage Business – Market Research and Feasibility Studies

  • Demographics and Psychographics

The demographic and psychographic composition of those who require the services of a mortgage brokerage firm cut across corporate executives, investors and business owners cum entrepreneurs who need long term loans to sort out real estate, property and accommodation related issues.

So, if you are looking towards defining the demographics of your mortgage brokerage business, then you should make it all encompassing. It should include corporate executives, investors, businessmen and women, start-ups, entrepreneurs, aspiring entrepreneurs and casual and full time workers within and outside the city you are operating in who have the capacity to pay back loans collected.

List of Niche ideas Within the Mortgage Brokerage Industry That You Can Specialize in

Most mortgage brokerage companies tend to operate general services that involve every business activity that a standard mortgage brokerage company is expected to offer, that is why it seem that there are no niche areas in the industry.

But on the other hand, some mortgage brokerage companies may decide to major in some key or niche areas such as;

  • Brokering residential mortgages
  • Brokering commercial and industrial mortgages
  • Brokering home equity loans
  • Brokering equipment financing arrangements
  • Brokering vehicle loans
  • Brokering residential mortgages online
  • Brokering mortgage refinances online
  • Brokering home equity loans online
  • Providing an online mortgage marketplace
  • Providing other related loan cum mortgage consulting and advisory services

The Level of Competition in the Mortgage Brokerage Services Industry

The level of competition in the mortgage brokerage services industry depends largely on your financial base (the liquid cash you can afford to lend out per-time and your access to cash) and how big and organized your mortgage brokerage company is.

The truth is that no matter the level of competition in an industry, if you brand and promote your products or services properly, you will always make headway in the industry. Just ensure you have what it takes to raise capital for your business, know how to reclaim loans from debtors and you know how to reach out to your target market (those who need long term loan to sort out property and facility related issues and can successfully pay back without much stress).

List of Well – Known Brands in the Mortgage Brokerage Industry

These are some of the leading mortgage companies in the United States of America and also in the globe;

  • Quicken Loans
  • Bank of America Home Loans
  • Discover Home Loans
  • Capital One Home Loans
  • HSBC Mortgages
  • S. Bank Home Mortgage
  • Union Bank Home Loans
  • State Farm Bank
  • Wells Fargo Home Mortgage
  • Nationwide Bank Mortgage
  • CitiMortgage
  • Fremont Bank Mortgages
  • CashCall Mortgage
  • PNC Mortgage
  • Citizens Bank Mortgages
  • GMAC Mortgage
  • Chase Mortgage
  • EverBank Mortgages
  • Home Loan Investment Bank
  • SunTrust Mortgage

Economic Analysis

When it comes to starting a mortgage brokerage company, you just have to get your feasibility studies and market research right before venturing into the business. It is good to mention that the mortgage brokerage business is not for rookies, it is for professionals who have successfully gathered the required experience and expertise to handle such business. But an aspiring entrepreneur can learn ropes on the job/business, you just have to be careful so that you won’t get swindled.

Starting this kind of business definitely entails that you raise plenty of startup capital (pool cash from interested investors) and also build good working relationship with banks and other financial organizations that have the capacity to issue out long term loans. If you are already a wealthy person, this might not be an issue. Depending on the scale at which you want to start from, you might require as much as multiple thousands of dollars to strike this off.

Starting Your Mortgage Brokerage Company from Scratch vs Buying a Franchise

When it comes to starting a business of this nature, it will pay you to buy the franchise of a successful mortgage brokerage firm as against starting from the scratch. Even though it is relatively expensive to buy the franchise of an established mortgage brokerage company, but it will definitely pay you in the long run.

But if you truly want to build your own brand after you must have proved your worth in the financial services industry, then you may just want to start your own mortgage brokerage company from the scratch. The truth is that it will pay you in the long run to start your mortgage brokerage company from the scratch. Starting from the scratch will afford you the opportunity to conduct thorough market survey and feasibility studies before choosing a location to launch the business.

Please note that most of the big and successful mortgage brokerage services businesses around started from the scratch and they were able to build a solid business brand. It takes dedication, hard work and determination to achieve business success.

Possible Threats and Challenges You Will Face When Starting a Mortgage Brokerage Services Business

If you decide to start your own mortgage brokerage company today, one of the major challenges you are likely to face is the presence of well-established mortgage brokerage companies and also other related financial lending businesses (banks, micro money lending services, micro – finance banks) who are offering the same services that you intend offering. The only way to avoid this challenge is to create your own market.

Other threats that you may face as a mortgage brokerage company operating in the United States are unfavorable government policies, fraudulent people who may not want to pay back the loans collected, the arrival of a competitor within your location of operation and global economic downturn which may affect your ability to raise working capital or access loan on behalf of your clients. There is almost nothing you can do as regards these threats other than to be optimistic that things will continue to work for your good.

Starting a Mortgage Brokerage Business – Legal Matters

  • Best legal entity to use for a mortgage brokerage business

When considering starting a mortgage brokerage company, the legal entity you choose will go a long way to determine how big the business can grow. Some mortgage brokerage companies design their business and services for the regional/community market, some for national market, while others for international market via franchising.

Generally, you have the option of either choosing a general partnership or limited liability company which is commonly called an LLC for a mortgage brokerage company. If your intention is to grow the business and have clients, both corporate and individual, from all across the United States of America and other countries of the world, then choosing general partnership is not an option for you. Limited Liability Company, LLC will cut it for you.

Setting up an LLC protects you from personal liability. If anything goes wrong in the business, it is only the money that you invested into the limited liability company that will be at risk. This is not so for general partnerships. Limited liability companies are simpler and more flexible to operate and you don’t need a board of directors, shareholders meetings and other managerial formalities.

These are some of the factors you should consider before choosing a legal entity for your mortgage brokerage company; limitation of personal liability, ease of transferability, admission of new owners, investors’ expectation and of course taxes. You can start this type of business as limited liability company (LLC) and in future convert it to a ‘C’ corporation or an ‘S’ corporation especially when you have the plans of going public.

Catchy Business Name Ideas Suitable for a Mortgage Brokerage Services Business

If you are considering starting your own mortgage brokerage company, here are some catchy names that you can choose from;

  • Dink Dunk Mortgage Brokerage Services, LLC
  • Housemate Mortgage Brokerage Company, Inc.
  • Claire Moor Mortgage Brokerage Services, LLC
  • Capital Express Mortgage Brokerage Company, Inc.
  • Housetop Mortgage Brokerage Services, LLC
  • Team Excel Mortgage Brokerage Group
  • Life Trust Mortgage Brokerage Services, LLC
  • Premier Mortgage Brokerage Services Ltd.
  • San Jules Mortgage Brokerage Services, Inc.
  • Life Line Mortgage Brokerage Services, Inc.
  • JP Morison Mortgage Brokerage Services, Inc.
  • Cape Nova Mortgage Brokerage Services, Inc.

Insurance Policies

In the United States of America and in most countries of the world, you can’t operate a business without having some of the basic insurance policy covers that are required by the industry you want to operate from. So, it is imperative to create a budget for insurance policy covers and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your mortgage brokerage company.

Here are some of the basic insurance policy covers that you should consider purchasing if you want to start your own mortgage brokerage company in the United States of America;

  • General insurance
  • Risk Insurance
  • Credit insurance
  • Deposit insurance
  • Financial reinsurance
  • Lenders mortgage insurance
  • Health insurance
  • Liability insurance
  • Workers compensation
  • Overhead expense disability insurance
  • Business owner’s policy group insurance
  • Payment protection insurance

Intellectual Property Protection/Trademark

If you are considering starting your own mortgage brokerage company, usually you may not have any need to file for intellectual property protection/trademark. This is so because the nature of the business makes it possible for you to successfully run the business without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.

Is Professional Certification Needed to Run a Mortgage Brokerage Business?

Aside from the results you produce as it relates to return on investment (ROI) and easy access to long term mortgage loans for your clients, professional certification is one of the main reasons why most mortgage brokerage companies stand out.

If you want to make an impact in the mortgage brokerage services industry, you should work towards acquiring all the needed certifications in your area of specialization. Certification validates your competency and shows that you are highly skilled, committed to your career, and up-to-date in this competitive market.

These are some of the certifications you can work towards achieving if you want to run your own mortgage brokerage firm;

  • Certified Mortgage Broker
  • GED Certification
  • Degree in Finance Related Courses

Please note that you cannot successfully run a mortgage brokerage company in the United States and in most countries of the world without necessarily acquiring professional certification and business license even if you have adequate experience cum background in the financial services industry.

List of Legal Documents You Need to Run a Mortgage Brokerage Services Business

The essence of having the necessary documentation in place before launching a business in the United States of America cannot be overemphasized especially a mortgage brokerage services firm. It is a fact that you cannot successfully run any business in the United States without the proper documentations. If you do, it won’t be long before the long arm of the law catches up with you.

These are some of the basic legal documents that you are expected to have in place if you want to legally run your own mortgage brokerage services firm in the United States of America;

  • Certificate of Incorporation
  • Federal Tax Payer’s ID
  • State Permit
  • Mortgage Broker License
  • Business License and Certification
  • Business Plan
  • Non – disclosure Agreement
  • Employment Agreement (offer letters)
  • Operating Agreement for LLCs
  • Insurance Policy
  • Consulting contract documents
  • Online Terms of Use
  • Online Privacy Policy Document
  • Apostille (for those who intend operating beyond the United States of America)
  • Company Bylaws
  • Insurance Policy
  • Memorandum of Understanding (MoU)

Financing Your Mortgage Brokerage Services Business

Aside from the required capitalization and pool – funds to invest with, starting a mortgage brokerage services firm can be cost effective. Securing a standard office in a good business district, equipping the office and paying your employees are part of what will consume a large chunk of your startup capital.

No doubt when it comes to financing a business, one of the major factors that you should consider is to write a good business plan. If you have a good and workable business plan document in place, you may not have to labor yourself before convincing your bank, investors and your friends to invest in your business or to partner with you.

Here are some of the options you can explore when sourcing for startup capital for your mortgage brokerage services firm;

  • Raising money from personal savings and sale of personal stocks and properties
  • Raising money from investors and business partners
  • Sell of shares to interested investors
  • Applying for loan from your bank
  • Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
  • Source for soft loans from your family members and your friends.

Choosing a Suitable Location for your Mortgage Brokerage Business

The mortgage brokerage services firm and most financial services based type of businesses require that you see physically with your clients hence it must be located in good location; a location that is prone to both human and vehicular traffic and a location that is at the epicenter of a business district if indeed you want to attend to loads of clients and maximize profits from the business,

It cannot be overemphasized that the location you choose to open your mortgage brokerage services firm is key to the success of the business, hence entrepreneurs are willing to rent or lease a facility in a visible location; a location where the demography consists of people with the required lifestyle. If you make the mistake of renting or leasing a facility for mortgage brokerage services firm in a not too visible or hidden location simply because it is cheap, then you must be prepared to spend more in promoting the business and perhaps giving direction to potential clients.

These are some of the key factors that you should consider before choosing a location for your mortgage brokerage services firm;

  • The demography of the location
  • The demand for the services of mortgage brokerage services firms in the location
  • The purchasing power of the residents of the location
  • Accessibility of the location
  • The number of mortgage brokerage services firms and related services businesses in the location
  • The local laws and regulations in the community/state
  • Traffic, parking and security et al

Starting a Mortgage Brokerage Business – Technical & Manpower Details

On the average, there are no special technologies or equipment needed to run this type of business except for customized loan services software, financial related software apps and social media management software applications. But you will definitely need computers/laptops, internet facility, telephone, fax machine and office furniture (chairs, tables, and shelves).

If you have enough capital to run a standard mortgage brokerage services firm, then you should consider the option of leasing a facility for your office; when you lease, you will be able to work with long – term planning, structuring and expansion.

As regards the number of employees that you are expected to kick start the business with, you would need to consider your finance before making the decision. Averagely, you would need a Chief Executive Officer or President (you can occupy this role), an Admin and Human Resource Manager, Fund Manager/Portfolio Manager, Risk Manager, Accountant, Business Development Executive/Marketing Executive, Loan Officers, Debt Collectors and Customer Service Officer or Front Desk Officer.

Over and above, you would need a minimum of 10 to 20 key staff to effectively run a medium scale but standard mortgage brokerage services firm.

The Service Delivery Process of a Mortgage Brokerage Services Business

On the average, the way mortgage brokerage services firms work varies from one agency to another, but ideally, a mortgage brokerage services firm is expected to first and foremost build a robust company profile before sourcing for working capital or partnering with banks and other long term loan issuing firms.

Basically, when clients visit a mortgage brokerage services firm for long-term loans, they are expected to come with all the necessarily documents and collateral and then fill the required forms. Proper screening of the documents and forms will be conducted by the loan issuing officer and other superior officers before the loan will be finally processed and issued to the clients.

Depending on the payment agreement reached by both parties, the customer will be reminded when it is time to start making installment payments for the loan collected and of course with interest. It is important to state that a mortgage brokerage services firm may decide to improvise or adopt any business process and structure that will guarantee them good return on investment (ROI) efficiency and flexibility.

Starting a Mortgage Brokerage Business – The Marketing Plan

  • Marketing ideas and strategies

As a mortgage brokerage services firm, you would have to prove your worth over and over again before attracting investors and individuals to give you the needed liquid cash/working capital. So, if you have plans to start your own mortgage brokerage services firm, it will pay you to first build a successful career in the alternative financial services industry.

People and organizations will only commit their money under your care if they know that they are going to get good returns on their investment.

So, when you are drafting your marketing strategies for your mortgage brokerage services firm, make sure that you create a compelling personal and company profile. Aside from your qualifications and experience, it is important to clearly state in practical terms what you have been able to achieve in time past as it relates to the alternative financial services industry and the organizations you have worked for. This will help boost your chances in the market place when sourcing for clients/investors.

Please note that in most cases, when sourcing for funds from banks and other financial institutions, you will be called upon to defend your proposal, so you must be pretty good with presentations. Here are some of the platforms you can utilize to market your mortgage brokerage services firm;

  • Introduce your business by sending introductory letters alongside your brochure to all the corporate organizations, households, start-ups, real estate investors, small and medium scale business community in the location you intend operating your business
  • Advertise your business in relevant financial and real estate magazines, radio and TV stations (make yourself available for mortgage brokerage services related talk shows and interactive sessions on TV and Radio)
  • List your business on local directories/yellow pages
  • Attend international financial cum real estate investment expos, seminars and business fairs et al
  • Create different packages for different categories of clients in order to work with their financial needs as it relates to loan and interest rates
  • Leverage on the internet to promote your business
  • Join local chambers of commerce and industries around you with the main aim of networking and marketing your services; you are likely going to get referrals from such networks.
  • Engage the services of marketing executives and business developers to carry out direct marketing

Factors That Will Help You Get the Right Product Pricing

One key factor that will help you offer the best services or give out loans with interest rate that is highly attractive is to ensure that you source your working capital from sources that won’t put pressure on you or give you high interest rate.

Another strategy is to ensure that you cut operational cost to the barest minimum, channel your efforts towards marketing and promoting your brand name. Aside from the fact that this strategy will help you save cost, it will also help you get the right pricing for your products and services.

You can also try as much as possible to work with independent contractors and marketers; with that, it will help you save cost for paying sales and marketing executives.

Strategies to Boost Your Brand Awareness and Create Your Corporate Identity

If your intention of starting a mortgage brokerage services firm is to grow the business beyond the city where you are going to be operating from to become a national and international brand, then you must be ready to spend money on promotion and advertisement of your brand.

In promoting your brand and corporate identity, you should leverage on the print, electronic media and also social media (the internet). As a matter of fact, it is cost effective to use the internet and social media platforms to promote your brand, besides it is pretty much effective and wide reaching.

Below are the platforms you can leverage on to boost your brand and to promote and advertise your mortgage brokerage services firm;

  • Place adverts on financial and real estate related magazines and newspapers, radio and TV stations
  • Encourage the use of word of mouth publicity from your loyal customers
  • Leverage on the internet and social media platforms like; YouTube, Instagram, Facebook, Twitter, LinkedIn, Snapchat, Badoo, Google+ and other platforms to promote your business.
  • Ensure that you position your banners and billboards in strategic positions all around your city
  • Distribute your fliers and handbills in target areas in and around our neighborhood
  • Contact corporate organizations, households, start-ups, real estate investors, small and medium scale business community in the United States et al by calling them up and informing them of your organization and the services you offer
  • Advertise your business in your official website and employ strategies that will help you pull traffic to the site
  • Brand all your official cars and ensure that all your staff members and management staff wear your branded shirt or cap at regular intervals.
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