How to Become an Independent Mortgage Broker

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A mortgage broker helps potential home owners with the financial side of things. A broker communicates with lending institutions and assists individuals with their real estate purchases, acting as the middleman between lenders and buyers. [1] Becoming an independent mortgage broker, where you work for yourself and one on one with clients rather than through a mortgage brokering firm, can lead to a sustainable career. But you will need to get your mortgage broker license and use certain tactics to find clients and retain them.

Part 1
Part 1 of 3:

Doing Research and Gaining Experience

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  1. Before you decide to become an independent mortgage broker, its important that you fully understand the role and responsibilities of the position. There are two types of mortgage brokers: residential mortgage brokers and commercial mortgage brokers. Residential brokers work with individual home buyers to help them get funding from lenders for their mortgage. Commercial brokers work with companies, on commission, to help them fund mortgages for commercial spaces. [2]
    • In both specializations, your role is to advise your client on selecting the best loans for them from various lenders and to process loan applications. To process loan applications, you will need to obtain the client’s credit report or financial statements and confirm their income and assets.
    • To do this job well, you will also need an detailed understanding of government regulations around real estate financing to help your client decide if the property is worth purchasing.
    • You will also need to be willing to travel to meet clients and to meet lenders in person on a frequent basis.
  2. To be an independent mortgage broker, you should have your high school diploma. Though the industry prefers you have a bachelor’s degree or vocational certificate in business, finance, or economics, it is not required. [3]
    • You will also need to get a mortgage broker license in most states and areas in order to become a mortgage broker recognized by lending institutions. You may also get certifications through the National Association of Mortgage Brokers to improve on your mortgage broker abilities and knowledge.
    • As of 2012, the median salary for a mortgage broker was $67,000. However, this amount may fluctuate for independent mortgage brokers.
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  3. Experience in the real estate or banking industry will help you learn how to gather and analyze financial documents, use loan-underwriting software, and understand real estate market trends. [4]
    • The demand for loan officers and real estate agents are expected to increase by 8% - 11 % from 2012 to 2022. Starting out in a growing job market can also help to boost your mortgage broker career.
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Part 2
Part 2 of 3:

Getting a Mortgage Broker License

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  1. The regulations for mortgage brokers varies from state to state. Use an interactive map of the US to find the legislation in your state by clicking here . To get more details on the licensing laws in your state, you can also contact the National Association of Mortgage Brokers (NAMB).
    • Some states require mortgage brokers to have a mortgage license before they can become a broker and some states do not. There are also certain regulations, like whether a mortgage broker can process a loan on a client’s 1st and 2nd mortgages, and if a broker must have a physical office in the state to be a legal mortgage broker in that state. [5]
    • With the growing number of independent mortgage brokers working online, the licensing laws are less strict around having a physical office, but some states require a mortgage broker license to broker mortgages for clients.
    • In Arizona, for example, all mortgage brokers must have a physical office in Arizona and the broker must be an Arizona resident. But in New York, a mortgage broker can work online from a remote location as long as she has proof of experience in mortgage brokering and recent, original credit reports.
  2. Most states process mortgage licenses through the National Mortgage Licensing Center. Approved courses for mortgage licensing are 20 hours or more and should contain three hours of Federal Law, three hours of Ethics, two hours of Non-traditional Mortgage Lending and 12 or more hours of elective, in addition to any specific content required in that state. You can take these courses online, from home.
    • The licensing fee through NMLS for a mortgage broker in most states is $1500. Most applications also require you to submit a Surety Bond of $10,000.
    • Some states also encourage mortgage brokers to get hands on experience in the industry, about three to five years total, before applying for their license.
  3. Once you complete your coursework, you will receive documentation showing you are now a licensed mortgage broker. You can then use this license to show potential clients you have certified knowledge of the industry.
    • Many states also require licensed mortgage brokers to take continuing education classes once they have received their license, once a year, to keep their knowledge up to date.
  4. There are three levels of certifications that you can receive are: entry-level (Certified Residential Mortgage Specialist), mid-level (Certified Mortgage Consultant), and advanced. These certifications will expand your existing knowledge of the loan process and the real estate industry, and will allow you to better serve your clients. [6]
    • To apply for entry and mid-level certifications, you must have a certain amount of work experience and years in the industry. You will then take a multiple choice exam for each certification. Each certification expires after three years.
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Part 3
Part 3 of 3:

Establishing Your Broker Service

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  1. Many mortgage brokers start at larger mortgage firms before branching out on their own. You could also gain experience in the mortgage arms of housing firms or banks to get a sense of the industry. Three to five years of experience at a larger firm is suggested before becoming an independent broker. [7]
    • Another option is to join an online mortgage service like LendingTree.com and gaining experience in an online based company. This is a good option if you are thinking about maintaining an online based independent mortgage brokerage. However, services like LendingTree.com are structured, meaning you will have to deal with overhead and other expenses as a broker in a large organization. [8]
  2. Some states will not allow you to be a mortgage broker without a physical office or place of business, while other states allow brokers to exist online and work remotely from a home office. Check what your state allows and then decide if you would rather work from an office or from home. [9]
    • Many independent mortgage brokers enjoy the flexibility of working remotely from a home office, communicating with clients online, and meeting clients in person in a casual setting. #*Some independent mortgage brokers only work part time hours, so they do not feel the need to rent out an office space.
  3. Your start up costs will depend on if you have an existing home office you are going to work from or if you are going to rent an office space. You will also need to budget for transportation to meet clients and lenders, as well as office supplies, and a computer. Your start up costs can range from $2,000 - $10,000, depending on your office set up and needed supplies. [10]
    • Keep in mind most residential mortgage brokers make a profit by charging a broker fee that is between 1% and 2% of the mortgage. Most brokers charge the lenders this fee, but some broker may charge the borrower this fee if the mortgage brokering process is complex or the lending process requires specialized knowledge.
  4. Mortgage brokers work on commission via the lending institution that advances funds for the mortgage. The commission can range from several hundred dollars to thousands of dollars, based on the mortgage amount required by the client. In order to become profitable, you need to find and retain your clients. You want your clients to have a positive experience and to help them achieve their ideal mortgage, as they will then refer you to other potential clients. [11]
    • Often, mortgage brokers will bring their existing relationships with lenders from their time at a larger firm into their independent operations. These lenders will then refer clients to the brokers and foster a healthy, mutually beneficial relationship.
    • Some mortgage brokers will charge more for difficult or more complex funding situations for clients, or they may charge a fee from the lending institution.
  5. The mortgage brokerage industry thrives on repeat business and referrals. Focus on fostering a goodwill relationship with the key touch points in the industry: the lending institutions and the real estate agents. If you successfully fund a complex mortgage for a client, your client will be happy and the lending institution will consider you a dependable and reliable mortgage broker. [12]
    • Real estate agents can also help to connect you to clients if they consider you a solid broker who has a reputation for brokering mortgages successfully. [13]
  6. As regulations around mortgage brokering shift and change, independent mortgage brokers must find ways to distinguish themselves and offer other skills to their clients. For example, an independent mortgage broker who is also a certified underwriter can help clients navigate tricky funding issues with the lending institution and be the go to broker for complex mortgages. [14]
    • As well, an independent mortgage broker who offers exclusive customer service and one on one attention to clients will distinguish herself from a sea of other independent mortgage brokers who may not be able to provide detailed client care. [15]
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Expert Q&A

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  • Question
    What is a timeshare property?
    Arun Ghosh
    Real Estate Expert
    Arun Ghosh is a Real Estate Expert and Licensee with over five years of experience, specializing in commercial real estate. He recently received a certification in Commercial Real Estate Analysis and Investment from the MIT School of Architecture and Planning. As the founder of Hutfin.com, Arun created an online marketplace designed to streamline the selling and buying of commercial property. Previously, he worked as a certified Cloud Architect and DevOps Engineer and is a member of prestigious organizations such as REIN, ISACA, EC-Council, and PMI. He has also served as a U.S. Army Officer. He holds a Bachelor's Degree from the University of Kerala and a Master's Degree from the Hough Graduate School of Business at the University of Florida.
    Arun Ghosh
    Real Estate Expert
    Expert Answer
    A timeshare is a vacation property shared by multiple owners, giving each person the right to use it for a set time each year. While it can be a cost-effective way to vacation regularly, it has downsides, like limited booking availability during peak times. If you're buying, take your time, read the contract carefully, and avoid companies demanding upfront payments. To sell or exit a timeshare, work with a trusted agent or company that collects payment only after the process is complete. If you regret a purchase, you can often cancel within a rescission period, usually 3–15 days, depending on your state. Always research and get everything in writing for your protection if you choose to proceed.
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  • Question
    I was a mortgage broker back in the 1990s. What do I have to do to get my broker's license again?
    Community Answer
    It is best to contact a financial regulation department in your state for information, as it varies state to state.
    Thanks! We're glad this was helpful.
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  • Question
    Can I buy an established mortgage broker business and operate straight away?
    Community Answer
    You can, but honestly this is a waste of money. It's not like you're buying a pipeline. This industry is all referral based and relationships count. Someone can sell you a name, but that doesn't mean a client comes with it. Also, you will need to be licensed through the state you plan on conducting business in. This comes with typically 20 hours of class work + additional state by state requirements. After that you will need to pass the testing and background requirements, which include criminal and financial checks.
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      References

      1. ↑ http://www.entrepreneur.com/businessideas/mortgage-broker
      2. ↑ http://learn.org/articles/Mortgage_Broker_5_Steps_to_Becoming_a_Mortgage_Broker.html
      3. ↑ http://learn.org/articles/Mortgage_Broker_5_Steps_to_Becoming_a_Mortgage_Broker.html
      4. ↑ http://learn.org/articles/Mortgage_Broker_5_Steps_to_Becoming_a_Mortgage_Broker.html
      5. ↑ https://www.mortgagenewsdaily.com/news/382007-mortgage-licensing-system
      6. ↑ http://learn.org/articles/Mortgage_Broker_5_Steps_to_Becoming_a_Mortgage_Broker.html
      7. ↑ https://www.wsj.com/articles/SB10001424052748703426004575338844017052822
      8. ↑ https://www.wsj.com/articles/SB10001424052748703426004575338844017052822
      9. ↑ http://www.entrepreneur.com/businessideas/mortgage-broker
      1. ↑ http://www.entrepreneur.com/businessideas/mortgage-broker
      2. ↑ http://www.entrepreneur.com/businessideas/mortgage-broker
      3. ↑ https://www.wsj.com/articles/SB10001424052748703426004575338844017052822
      4. ↑ https://www.wsj.com/articles/SB10001424052748703426004575338844017052822
      5. ↑ https://www.wsj.com/articles/SB10001424052748703426004575338844017052822
      6. ↑ http://www.entrepreneur.com/businessideas/mortgage-broker

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