How to Become a Mortgage Broker in 7 Steps

Last Updated:
December 24, 2021
Kay Nicole

Become a Mortgage Broker in 7 Steps

Becoming a mortgage broker looks like a very promising career path right now. Demand and compensation for these professionals are both high, and there is plenty of advancement potential, especially for those well-versed in insights from the Australian property investment book. Plus, mortgage brokers get the satisfaction of helping people purchase a home to live in – their most important resource. Few other career options are as personally and professionally rewarding as connecting people with home loans.

If this piques your interest, there are a few requirements you must meet before you can work legally as a mortgage broker. Since this is a sensitive industry, it’s also highly regulated, and there are standards that all brokers must meet. Those standards are set by each state and can vary widely. However, there are some common requirements that any aspiring mortgage broker should prepare for. Follow this step-by-step guide:

  1. Complete a Pre-Licensure Class

As of 2008, all mortgage brokers in America must obtain a license issued by the state where they operate from. The first license requirement you must meet to become a mortgage broker is completing a pre-license class administered by the Nationwide Multistate Licensing System and Registry (NMLS).

The class covers subjects that all mortgage brokers should know about, including:

  • Federal mortgage regulations
  • Ethics and fraud
  • Non-traditional mortgage lending standards
  • Various electives on mortgage origination

You will take this class through an NMLS approved school at a current cost of around $200-$300. Brokers can elect to take additional training.

  1. Pass the NMLS Exam

You will next need to pass an exam that covers much of the same information as the pre-licensure class. The exam will have questions on five subjects: federal law, mortgage origination general knowledge, ethics, loan origination activities, and uniform state consent. You can register for the exam on the NMLS website and pay a registration fee, after which you have 180 days to make an exam appointment. The exam will last for 225 minutes total. It begins with a tutorial and applicant survey, which takes 30-35 minutes, followed by 120 questions you have 190 minutes to answer. Passing requires correct answers on 75% of the questions, and fewer than 60% of test-takers pass on their first time. With that in mind, be sure to study!

  1. Register Your Brokerage

Before you can license your brokerage it must become a legal entity in your state. First, pick a business name and find a location. Then, choose the business structure (sole proprietorship, partnership, LLC, etc). Finally, register the business with the IRS to get an Employer Identification Numbers (EIN), which you will need to start a business bank account and pay business taxes. How you set up your business – from the name you choose to the structure you settle on – can have long-term implications, so take your time with this step.

  1. Obtain a Mortgage Broker Surety Bond

Most but not all states require you to have a mortgage broker surety bond to obtain a license. These types of bonds hold you accountable for breaking state laws that apply to mortgage lending. Anyone who suffers damages as a result of mortgage broker misconduct can file a claim for compensation against the surety bond. The surety that underwrites the bond guarantees a settlement for valid claims. After settling, however, the surety collects the settlement amount, plus interest and fees, from the mortgage broker who caused the claim.

To get a bond, you will need to:

  • Complete an application
  • Submit to a credit check
  • Pay the bond premium

The best way to handle bonding requirements is through a trusted surety agency that can streamline and simplify things from beginning to end.

  1. Obtain a Mortgage Broker License

The exact requirements to get a bond are different in each state. Nevertheless, you will always need to provide proof of having completed the class, passed the test, registered your brokerage, and obtained a surety bond. You will also need to undergo a fingerprint, background, and credit check. Once approved to get a license, expect to pay between $1,000 and $2,000 in licensing fees.

  1. Build Your Professional Network

You have legal clearance to work as a mortgage broker as soon as you get the state license. However, most mortgage brokers don’t find their first clients, or steady clients, until they develop relationships in the local real estate community. Knowing real estate agents and others involved with buying and selling property can be an essential asset for new brokers. Ways to build a professional network include signing up for local events, offering a variety of mortgage products, trying various means of communication, and offering great customer service.

  1. Stay In Compliance

Mortgage brokers will need to keep their license and bond renewed to keep their business in compliance with the law. Renewal will involve paying a new premium in both cases. Don’t let expiration dates pass or otherwise jeopardize license and bond coverage because your career becomes illegal without it.

Follow these seven steps and your career as a mortgage broker can climb as high as your ambitions carry it.

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