Things You'll Need:
- Capital (at least $50,000) License
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Step 1
Research the lending market. The business is highly competitive and you'll have your work cut out for you if you jump in with no experience or knowledge of the field. Contact your local banker or lender at a community credit union and pick his or her brain for facts and best practices. Become familiar with market rates (prime and LIBOR) as these will affect the profitability of your business.
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Step 2
Partner with a knowledgeable loan officer. Having a partner is beneficial for many reasons: first, it's virtually impossible to get a loan brokerage license without an experienced loan officer (at least three years) listed as an officer of the company; second, a second person may bring more up-front capital for investment; and last, bringing on someone who is market-savvy and seasoned will instantly elevate the legitimacy of your business. Brokers make money on the fees charged on transactions (mostly origination fees; the closing costs like appraisal and title are passed on to those who conducted the research). If you are a new broker partnered with an experienced one, you'll need to split the fees with your partner 40/60 where he or she receives the greater portion--remember, you would not have this business without your partner.
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Step 3
Apply for a surety bond. A loan brokerage must be bonded. Contact the National Association of Surety Bond Producers to find an agent (see Resources). A surety bond in the amount of at least $25,000 for your principal brokerage location will be required. You will also need 25 percent of this coverage on each additional location you choose to set up.
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Step 4
Get a license. With an experienced mortgage broker as your partner, you'll have no trouble obtaining this. The fees for these licenses are usually between $800 and $1000 dollars. You will also need to pay additional fees for any new branch location (between $100 and $300) and for every new broker that comes to work for you (between $50 and $100). Licenses expire after one year, but most states do not impose a renewal fee.
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Step 5
Register your business with your State's office of Secretary of State (see Resources.) Every new lending corporation or LLC must be registered so that the office of Finance and Corporate Securities can confirm your lending is up to state and federal regulations.
