Starting a mortgage business varies from state to state. Generally, most states require licensing. Whether you plan to obtain a brokerage or banking license, the process is initially similar. Obtaining a license to originate mortgages usually involves several steps. Read more for help.
Instructions
1. Contact your state's office that oversees mortgage licensees. This is commonly the same office that oversees real estate businesses. Through this office, you will be furnished with the proper application requirements. Depending on your state, your application may include a fee of between $1,000 and $2,000 and is usually nonrefundable.
2. Check your personal credit history and the credit reports of your business partners. In some states, having poor credit may nullify you or make it difficult to obtain a license. Pay all outstanding collections, judgments, liens and past-due accounts before starting the application process. If you have a prior bankruptcy, there may be a seasoning period during which you must wait before applying. Include letters of explanation regarding all derogatory credit accounts with your application packet.
3. Make a list of all your assets. Depending on your state's guidelines, you may be required have a liquid amount of working capital to start a mortgage business. Some state agencies prefer applicants have between $20,000 to $30,000 in assets, including cash, office furniture, computers, stocks, bonds and equity in real estate or automobiles.
4. While your application is being processed, which may take 30 to 90 days, choose a location and begin setting up your office. In some states it is permissible to run a mortgage business out of your home. However, in others, it is required that your business have its own physical address.
5. Hire an attorney and/or an accountant. Some states require mortgage businesses to be incorporated. They will assist you in incorporating, setting up business accounts and properly adhering to the guidelines in your area.
6. Develop a business plan. It is a common for new mortgage companies to begin hiring loan officers and bringing in business without determining the amount of monthly revenue needed to cover their overhead. This may include office rent, computer leases, payroll for salaried or hourly employees, telephone and Internet access and credit reporting fees. It is also important that you have a marketing plan to have a clear vision of where your clients will come from. Some mortgage originators depend on referrals from real estate agents and other related professionals. Others depend on walk-in business, while some do direct mail and direct advertising.
7. Begin originating loans. After your application is approved, you will receive your license in the mail, along with all of the proper paperwork your clients will be required to sign when they apply for a loan. You may initially need to work closely with a representative of your state on your first few loans.
