A mortgage broker license is a specialized certification that permits you to accept, solicit, process or negotiate mortgage loans on behalf of third-party home buyers. Acquiring this license is essential for protecting yourself as well as your customers.
Licensing is mandatory to operate as a mortgage broker in all states, and the requirements vary by location. Harbor Compliance can help determine your business’ licensing needs and offer guidance on how to submit paperwork and manage renewals.
The mortgage broker industry is strictly regulated by both federal government and your state’s department of financial services, or DFS. As such, you must complete an extensive examination and adhere to all relevant laws, rules, and regulations in order to remain compliant.
As a mortgage broker, you don’t need a college degree but should possess experience within the lending industry or related disciplines such as marketing, accounting, economics or business administration. Furthermore, your background must include strong credit and income analysis capabilities.
To obtain your mortgage broker license in California, you must complete the state’s licensing process and pass a test. The exam content varies by state but typically covers topics like federal law and regulation, ethics, as well as nontraditional mortgage products.
Pre-Licensing Training – After passing the mortgage broker exam, you must also complete 20 hours of training through an accredited education provider. You can access this instruction online, in classes or through private tutoring.
Practice Tests – The NMLS offers a selection of practice tests to help you prepare for your broker license exams. These include free and paid test prep courses, as well as NMLS groups where you can study alongside other mortgage professionals.
Bonds – Before becoming licensed as a mortgage broker in your state, you’ll need to post a surety bond. This insurance protects clients if you become negligent and cause them harm by losing their property or money.
A surety bond typically costs between 0.5% and 5% of your total business revenue, depending on how many mortgage loans you handle.
Selecting Your Business Structure – Once you identify the structure that best meets your individual requirements, you must decide how much taxation you pay, how daily operations run smoothly, and which legal protections you have available. Your decision will have an impact on how much in taxes you pay, what legal rights are afforded you, etc.
Furthermore, you’ll need to select a location for your office. Most brokers have an office close to their clients but you have the option of working from home if that is what you prefer.
Once registered with the state and paying fees, you’ll need to set up your business by renting office space and purchasing other necessary supplies. Although this step can take some time and money, it is a necessary one in ensuring legal protection so you can do what needs doing.
As a mortgage broker, there are plenty of rewards to being in this profession – such as making an impact in your community and saving customers time and money. But it’s essential to remember that this career path may not suit everyone.