If you’re good with numbers and desire a career in the real estate and mortgage industries, you might be interested in becoming a mortgage broker – and understanding what the role entails and what the requirements are can help you pursue this profession with greater ease.
Data from Glassdoor shows that mortgage brokers in the United States have an average annual income of at least $70,000 – higher than the national average of $54,000 in 2021, according to the Bureau of Labor Statistics (BLS).
Brokers are paid by the lender when a loan is closed, with the fee typically between 1% to 2% of the total loan amount, according to finance company Nerdwallet.
Additionally, you don’t need to have a college degree to qualify – and everyone starts on equal footing because you have to pass the same exams and meet your state’s licensing requirements.
Here are vital things that you must know from pre-licensing to getting your surety bond if you decide on becoming a mortgage broker.
Becoming a mortgage loan broker can be a rewarding career path for those who enjoy sales, finance, real estate, and helping people. Mortgage brokers play a key role in matching home buyers with mortgage lenders and loan products. If you’re interested in entering this growing field, follow this step-by-step guide.
Understand What Mortgage Brokers Do
Mortgage brokers serve as intermediaries between borrowers seeking home loans and the banks, credit unions and other lenders providing them. Rather than lending money directly, brokers analyze a borrower’s financial situation and then shop different lenders to find suitable mortgage products.
The primary duties of mortgage brokers include
- Meeting with clients to discuss their budget, credit, down payment funds and home buying goals
- Collecting documentation and pre-qualifying buyers for mortgage financing
- Researching various loan programs that match the client’s needs
- Comparing interest rates and terms from multiple mortgage lenders
- Presenting loan offers to buyers and guiding them through the application process
- Preparing all paperwork and disclosures for the mortgage application
- Communicating with lenders on the client’s behalf until closing
- Educating clients on credit improvement and debt reduction strategies
Mortgage brokers provide home buyers with choice and mortgage expertise They simplify the loan process and help borrowers get approved and find the best financing deal.
Research Licensing Requirements
Mortgage brokers must hold a state license to practice. Initial license requirements vary by state but usually include:
- Being at least 18 or 19 years old
- Passing a criminal background check
- Having a high school diploma or GED
- Completing pre-licensing education courses
- Passing a licensing exam
- Carrying an errors and omissions insurance policy
Pre-licensing courses cover topics like federal mortgage regulations, ethics, lending concepts, loan products, and more. License candidates must pass either a state-specific exam or the National SAFE Mortgage Licensing Exam.
After earning your license, you’ll need to complete regular continuing education to keep it current. You must also renew the license periodically by paying fees and meeting other state requirements.
Gain Sales Experience
Experience in sales or customer service roles provides a solid foundation for working as a mortgage broker. Look for jobs that build skills in areas like:
- Communication and active listening
- Building rapport and relationships
- Customer needs analysis
- Multi-tasking in a fast-paced environment
- Record keeping and attention to detail
- Explaining complex information clearly
- Negotiating win-win solutions
- Persuasion and helping people make decisions
Consider retail sales, insurance sales, account management, real estate, and similar roles. Any position dealing with the public and sales will prep you for interacting with mortgage clients.
Build Your Expertise
To match borrowers with the optimal loans, brokers must have in-depth knowledge of mortgage lending. Before getting your license, build expertise by:
- Reading mortgage industry news and analysis daily
- Learning about popular mortgage programs like conventional, FHA, and VA loans
- Researching mortgage rates, trends, regulations, and terminology
- Studying lending guidelines from Fannie Mae, Freddie Mac, and the FHA
- Taking the free mortgage training modules from the NMLS Training Center
Continue expanding your knowledge throughout your career. The mortgage industry changes rapidly so lifelong learning is a must.
Choose a Brokerage
Some brokers start their own small business while others join established brokerages. Joining a larger firm can provide more structure, training, and mentoring when you’re new to the field. Plus, an existing brokerage will have lender relationships, templates and systems in place.
Look for brokerages that:
- Offer competitive commission splits
- Provide strong training programs
- Use current mortgage software and tools
- Maintain compliance with regulations
- Employ experienced loan processors
- Have a great reputation with local real estate agents
Avoid brokerages pushing you to sell certain products or commit fraud. Find an ethical brokerage focused on your long-term success.
Build Your Network
A huge part of succeeding as a mortgage broker relies on networking and referrals. Here are effective ways to build your network:
- Join your local Realtor association as an affiliate member
- Attend real estate association meetings and events
- Speak about mortgages at first-time homebuyer seminars
- Volunteer through housing-related charities and nonprofits
- Get to know loan officers at banks and credit unions
- Connect with housing counselors and financial planners
- Join brokers associations to meet experienced peers
The more relationships you build, the more referral partners you’ll gain. Realtors will be one of your top sources of broker business.
Get a Mentor
A mentor can shortcut your path to success as a new mortgage broker.Seek out an experienced broker willing to show you the ropes. A mentor can help you:
- Master mortgage software, tools, and systems quickly
- Polish your script and sales skills when meeting clients
- Learn ins and outs of various loan programs
- Improve your speed and workflow efficiency
- Build relationships with local lenders and real estate agents
- Avoid common mistakes rookie brokers make
Finding the right mentor gives you a major advantage launching your career. Don’t turn down this opportunity.
Continue Your Education
Education doesn’t stop after getting your broker license. To excel, you must stay updated on products, rates, regulations, and lending trends.
Set aside time each week to read industry publications, take CE courses, attend conferences, listen to podcasts, and more. Strong brokers constantly strengthen their mortgage knowledge base.
Consider earning additional designations like Certified Mortgage Planner, Certified Mortgage Banker, and Certified Residential Mortgage Specialist to boost your expertise.
Make learning a habit throughout your mortgage brokering career. Don’t become stale and outdated.
Deliver Exceptional Service
Success ultimately comes down to skillfully guiding borrowers through the mortgage process and delivering an amazing client experience.
Provide five-star service by:
- Making clients feel valued, respected, and cared for
- Being transparent about rates and fees
- Communicating frequently and keeping clients informed
- Responding quickly to inquiries and issues
- Having patience answering all questions
- Going above and beyond basic expectations
- Following up post-closing and asking for referrals
Happy clients will help your broker business grow exponentially through referrals.
Becoming an exceptional mortgage broker takes dedication but brings great rewards. By following this guide, you can enter this fulfilling career field poised for prosperity.
Obtain your high school diploma or GED
As previously mentioned, you don’t need a college degree to become a mortgage broker. However, all 50 states require you to have at least a high school diploma to qualify.
Otherwise, you need to pass the General Educational Development Test (GED). You’ll earn your GED credential by getting a score of 145 in its four exams. This will serve as your diploma even if you didn’t graduate from a conventional high school.
A college education is not required, but it can help to have finished a two- or four-year course in finance, accounting, marketing, economics, or business administration. The principles learned from these disciplines can serve as a solid foundation for your day-to-day work.
Regarding previous work experience, you don’t need one but having some type of relevant training is recommended. For instance, you can work at an established mortgage company for a few years to gain first-hand knowledge before striking out on your own.
Numerous mortgage brokers are former loan bankers or officers who eventually decided to work independently. Some are previously real estate agents who wanted to try the financial side of their trade.
Establish and register your mortgage brokerage as a legal business
The next step is to register your brokerage as a legal entity in your state. Below are the steps for registration, according to the US Small Business Administration (SBA).
- Choose your brokerage business name
- Pick your business location
- Choose a business structure
- Register your business to federal, state, and local agencies
- Get your federal and state tax ID numbers
- Apply for licenses and permits
The most common business structures chosen by new mortgage brokers are sole proprietorship, partnership, and a limited liability company.
Your choice influences the taxes that you pay, your day-to-day operations, and your legal protections or benefits.
Each structure has its pros and cons, so you should pick one that best suits your situation and business goals. You can eventually change its structure or dissolve your business to register a new one but these entail certain fees.
- Sole proprietorship – If you are working independently like most new brokers, you can register as the sole trader for your business. This is the easiest type to form and grants you complete control of your business.
This structure also means “your business assets and liabilities are not separate from your personal assets and liabilities,” says the SBA. “Sole proprietorships can be a good choice for low-risk businesses and owners who want to test their business idea before forming a more formal business.”
However, being the sole trader means that you have unlimited liability. You may be held personally liable for any debt or obligation incurred by your business.
- Partnership – You can form a partnership if you are starting a simple brokerage firm with two or more people. It’s a good way to pool resources and expertise from a few people to create a stronger business model.
In this structure, one partner assumes unlimited liability while the rest have limited liability. The latter tends to have limited control over the company as documented in the partnership agreement.
- Limited liability company (LLC) – Alternatively, you can form an LLC to have increased protection from personal liability. This protects your personal assets like your home and savings accounts in case your mortgage business faces bankruptcy or lawsuits.
However, LLCs have limited lifespans in most states. You may be required to dissolve your LLC and register a new one in case a member leaves or joins your group.
After deciding your business structure, it’s finally time to register with federal agencies. Use the Internal Revenue Service (IRS) assistance tool to apply for an Employer Identification Number (EIN). This is also known as your state tax ID and federal tax ID numbers.
You need the EIN to create your business bank account and pay your taxes. In a nutshell, it’s like your personal security number but for your business.
How to Become a Mortgage Loan Officer in 2024! (Step by Step)
FAQ
Is it hard to start as a mortgage broker?
Is being a loan broker profitable?
How much does it cost to become an MLO in Florida?
How do I become a licensed mortgage broker?
To become a licensed mortgage broker, you need a high school diploma or GED, complete NMLS-approved pre-licensing courses, and pass the SAFE Mortgage Loan Originator Test.
How do I become a mortgage broker without a college degree?
1. Get your high school diploma or GED While you do not need a college degree to become a mortgage broker, you do need a high school diploma. If you do not have your high school diploma, you can earn your General Education Development (GED) with a score of 145 in its four exams.
How much training do I need to become a mortgage broker?
To become a mortgage broker, you must complete three hours of training on federal law and regulations, three hours on ethics, two hours on nontraditional mortgage products, and twelve hours of elective courses. This training must be completed no more than three years before application submission.
How do I start a career as a mortgage broker?
There are numerous benefits to starting a career as a mortgage broker. The steps to get started include 20 hours of pre-licensing education and passing the SAFE exam.