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How To Start A Mortgage Company

Starting a mortgage company requires an extensive finance background and the proper licenses.

Former brokers often start mortgage compnies. [©Jupiter Images, 2010]
©Jupiter Images, 2010
Former brokers often start mortgage compnies.

How to Start a Mortgage Company

Individuals can learn how to start a mortgage company by first gaining experience in the mortgage industry. Like any business, it begins by taking the appropriate steps. One of the first steps for individuals to take may be deciding that they want to own a business. Then, they can go on to form a company. Another step individuals may take might be to obtain a mortgage license.

In some ways, starting a mortgage company is similar to starting any other kind of business, but in certain aspects its a lot different. Working for an established loan officer, a lending institution or in the real estate industry might be one way that individuals can gain experience prior to starting their own mortgage company. Another option for some individuals might be to join an already established national or regional company.

What is Needed to Start a Mortgage Company?

In regard to starting a mortgage company, The Utah Division of Real Estate gives one example of what might be necessary for their state. Other states have their own list of requirements, which might include:

  • License(s)
  • Educational requirements
  • Previous industry experience
  • To seek tips and advice from other mortgage company owners
  • Office space, equipment and supplies
  • Purchase a mortgage processing software
  • Lender approvals
  • Appraisal, title/escrow contacts
  • A business and marketing plan
  • Potential clients and the ability to grow a customer base
  • Insurance

The United States Department of Housing and Urban Development has an on-line library that contains numerous mortgage-related articles. The United States Governments official website also covers a host of mortgage related topics.

What Type of Licensing, Legal Paperwork and Investment is Required?

The U.S. General Services Administration is one source for individuals to consider when looking at the various aspects of how to start a mortgage company. This site offers information and articles about some of the specific requirements.

Individuals may want to incorporate the business as a limited liability company (LLC) in order to protect their assets, gain credibility and to meet state requirements for licensing. This is also a well-suited option for sole business owners.

The Internal Revenue Service has published an article that provides individuals with more information. According to the article, LLCs are popular because, similar to a corporation, owners have limited personal liability for the debts and actions of the LLC. Other features of LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation.

In regard to licensing, licensing varies from state to state. Individuals should check with their state to see what is required in order to obtain a license.

According to The Nationwide Mortgage Lending website, a system has been established to aid individuals in the mortgage licensing process. The Nationwide Mortgage Licensing System (NMLS) has been designed to streamline the licensing process, improve supervision and increase transparency in the mortgage industry. NMLS contains a single record for each mortgage lender, broker, branch and loan originator. This single record can be used to apply for, amend and renew licenses in any participating jurisdiction.

State licensed mortgage lenders, brokers and loan officers may use NMLS to apply for, amend, update and renew licenses. NMLS is a secure, Internet-based licensing system for the residential mortgage industry. Regulators us NMLS to process and manage licenses in their jurisdiction. State regulators have been working since 2003 to develop a nationwide licensing system for the residential mortgage industry. It streamlines the licensing process, enhances supervision and increases consumer protection. Be sure to check the website for specifics.

Individuals may check the State Licensing Resource page for more information about each state.

The amount of the investment may vary, but there are costs associated with starting any kind of business. Requirements, fees, insurance costs and operating expenses are among the various aspects to consider. Individuals may contact the Secretary of State to find out about what fees and licenses are required for each state.

The Secretary of State can also provide individuals with information about required bonds and necessary insurance policies. Many states require mortgage companies to post at least a $10,000 surety bond in order to operate within the state.

The Federal Trade Commission has a published list of glossary terms, which may help individuals understand the various terms associated with starting a mortgage company.

What are the Benefits of Starting a Mortgage Company?

The benefits of starting a mortgage company may be great. This kind of business can give individuals freedom, and provide them with an opportunity for unlimited earning potential.

Also, once it is established, there are several ways that individuals can grow a mortgage company. A successful mortgage company can grow by referrals, repeat business or with a targeting marketing strategy.

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