As a mortgage broker, you serve as an intermediary that connects borrowers and lenders for mortgages together. You do not use your funds for origination mortgages. Instead, you just connect borrowers and lenders, helping them find the best option based on the interest rates and financial situations.
Mortgage brokers are also responsible for getting the borrower’s paperwork and sending that to the mortgage lender so the loan can be underwritten and approved. This includes assessing the credit background of a client and examining their income statements. The salary of a mortgage broker comes from commissions from the lender, borrower, or both at the time of closing.
This contrasts with mortgage or loan originators who originate mortgages in the primary market, working directly with the loan processors and underwriters. Unlike the mortgage broker’s commission-based salary, a mortgage loan originator’s salary comes from fees charged for originating the mortgage as well as the difference between what the borrower receives and the premium that they can get from a secondary market. Most mortgage originators are mortgage brokers, mortgage bankers, or retail banks.
1. Prepare to get a mortgage broker license with a pre-licensure class
Before you get your mortgage broker license, you will need to take a pre-licensure program or class. This is a 20-hour class, and it will teach you relevant information regarding state and federal laws. You will also learn about loan officer ethics, financial regulations involving mortgages, and mortgage origination.
The class is typically divided into three hours of learning about federal regulations and laws, three hours of learning about ethics, and two hours learning about nontraditional mortgage products. The remaining 12 hours of the pre-licensure class typically include elective courses, allowing you to choose a focus or follow your interests.
The pre-licensure class, as well as the test you will need to pass, are both administered by the nationwide multistate licensing system & registry (nmls). The organization’s website can help you find courses, testing schedules, and other relevant information.
Keep in mind that you have to complete the pre-licensure course within three years of submitting your application to become a licensed mortgage broker.
2. Familiarize yourself with the exams you need to take
To get your license, you will need to pass a national test as well as one specific to your state. The national test comes from the previously mentioned national mortgage licensing system and is the safe mortgage loan originator test.
The national test is universal, and everyone who wants to earn a mortgage broker license in the united states takes the same test. The state portion focuses on the regulations and rules in your state regarding mortgages.
Although this means you only need to take a single test to become a mortgage broker, keep in mind that it comprises two parts. A passing grade is at least 75 percent. If you fail the test, you must wait at least 30 days to retake it, during which time you should review areas you struggled in. If you fail three times, you have to wait at least 180 days.
One of the great things about this exam is that you can take it at nearly any time, unlike some professional tests that are only offered once a year. Even so, you have to register for the test ahead of time, and it is not continuously offered, just periodically. Once you pass the test and get a brokerage bond, you are eligible for your mortgage broker license.
3. Know the costs of getting a mortgage broker license
The costs associated with becoming a mortgage broker will depend on which state you live in. In most states, there is an nmls licensing fee of $1,500. You will also have the costs associated with registration and a mortgage broker bond.
It may cost about $300 to $500 to register with your state and establish your brokerage as a business entity. You will also need to pay for office locations, computers, phones, internet, and other office supplies.
Other costs may include a credit report fee and a fee for a criminal background check.
You should also keep in mind that depending on your state, there may also be a net worth requirement for your mortgage broker license. In california, for example, those who want a residential broker license need a net worth of $50,000.
4. Register your mortgage brokerage and get your mortgage broker bond
Once you have completed your exam and the pre-licensure class, you will need to register your mortgage brokerage before getting the license. The requirements vary by state and can include choosing a location and business name, getting an employer identification number, and officially choosing a business structure (partnership, c corp, s corp, or llc).
The mortgage broker bond is a legal requirement for licensing. It protects your clients if you do not follow your state’s rules for mortgage brokers. Every state has slightly different requirements for how much of a bond you must have. The bond may also depend on the type of investors you use, with brokers who only use institutional investors typically having lower bond requirements. Your state may also determine the bond amount based on your loan volume.
You will pay a percentage of this required bond amount based on your credit score, financial history, business details, and claims history. The typical range for mortgage broker bond requirements is $10,000 to $150,000.
In most states, you will need to have passed your exam, taken the pre-licensure course, paid the licensing fee, and gotten the bond before you can apply for a mortgage broker license.
5. Take advantage of resources to help you get a mortgage broker license and put it to good use
As you study for your mortgage broker license and work on applying for it, take advantage of all the resources at your disposal.
You can also get assistance from others in the industry, including experienced mortgage brokers and those you will likely work with, such as real estate agents and lenders. Not only can lenders and real estate agents help you understand the industry as a whole, but they can also help bring in clients. It is also wise to build up partnerships with tax accountants or financial advisors.
6. Have realistic salary expectations
Before you go through the steps to become a mortgage broker, make sure that you have realistic expectations regarding your salary. The salary of mortgage brokers varies based on your experience and where you live. The average tends to be around $52,000 to $75,000, but the salary for mortgage brokers can be anywhere from $30,000 to $200,000 annually.
Remember that independent mortgage brokers earn commissions for each loan they broker. By contrast, brokers who work for a mortgage brokerage may earn a salary plus commissions or benefits or still just be paid based on commissions.
7. Never stop your education
Once you become a licensed mortgage broker, do not stop learning. You will be responsible for familiarizing yourself with and remaining informed on all the changes to mortgage lending that apply to your state.
There is also a requirement for continuing education to maintain your license and keep it current. This requirement helps ensure that you can provide your clients with up-to-date and accurate mortgage loan information. The continuing education requirements can be accomplished in-person or online, allowing you to choose the learning style that works best for you and your schedule.
The continuing education requirements vary by state. For example, colorado requires eight hours of continuing education each year, in addition to a two-hour course that the colorado division of real estate runs.
Why you need a mortgage broker license
Having a mortgage broker license is a legal requirement to become a mortgage broker. As such, you would be breaking the law and, therefore, subject to fines or other penalties if you were discovered. Additionally, the licensure process teaches you the most important information that you will need to know. For example, the pre-licensure course is the best way to ensure you thoroughly understand the state and federal regulations and laws regarding lending.
Once you get your mortgage broker license, podium’s free messaging tools can help you easily stay in touch with clients and other professionals.