How To Become a Mortgage Broker in 7 Steps (With FAQs)
A mortgage broker works in real estate to facilitate mortgage agreements between lenders and borrowers. If this sounds appealing and you enjoy communicating with others, you might consider pursuing this role. Understanding the position's duties and its specific requirements may help you determine the qualifications and skills to develop for success as a mortgage broker.
In this article, we explain what a mortgage broker does and how to become one, plus share answers to frequently asked questions.
What is a mortgage broker?
Mortgage brokers, also known as mortgage loan officers, connect homebuyers and homeowners with the best deals possible by conducting thorough real estate market and mortgage industry research. They work on the client's behalf to find suitable interest rates and terms. Typically, mortgage brokers understand lending rates, terms and institutions, credit reporting and credit eligibility criteria.
What does a mortgage broker do?
While mortgage brokers help individuals secure home loans, they also have several other duties. Here are some primary duties of a mortgage broker:
Establishing and maintaining professional relationships with lenders to recommend them to clients
Sharing different loan options with clients and helping them make informed decisions regarding a home loan
Finding loan programs for clients with the best rates, terms and closing costs
Ensuring loans follow current regulations and laws
Gathering necessary documents, reviewing a client's credit history and verifying their financial statements
Educating clients on the loan process, the documentation they need and the estimated timeline for their loan approval
Teaching prospective homebuyers about the real estate and lending market and sharing how it impacts their chance of buying a home or refinancing
Comparing lender fees and terms to present borrowers with favorable options
Applying for mortgage loans with lenders on their client's behalf
Completing closing paperwork with a mortgage lender, the title company and insurance broker
How to become a mortgage broker
Here's a list of seven steps on becoming a mortgage broker:
1. Earn a diploma and a postsecondary degree
The first step to becoming a mortgage broker is to earn at least a high school diploma or GED. While most employers of mortgage brokers don't require candidates to have college degrees, candidates often earn an associate or bachelor's degree in business administration, finance or accounting. This may help improve their career opportunities and potential salaries.
2. Take a pre-licensure class
Typically, mortgage brokers obtain licenses before entering the field. To prepare for the licensure exam, you'll complete a pre-licensure program. This is usually a 20-hour class, covering topics like federal and state mortgage laws, broker ethics and financial regulations. Completing a course like this can help you familiarize yourself with the exam subjects and ensure you retain important information.
3. Pass the National Mortgage License System (NMLS) test
Once you complete the pre-licensure course, pass the NMLS exam. Known as the SAFE Mortgage Loan Originator Test, this exam analyzes your knowledge about topics, such as mortgage practices and state guidelines and regulations. You can pass the state and federal parts of the exam with a score of at least 75%. Then, you can renew your license annually by passing background and credit checks.
Some states have additional requirements, so it's vital to research your state's regulations before applying for renewal.
4. Pursue a job or establish your own brokerage
After you pass your exam and complete the required coursework, you can either pursue an open mortgage broker role with an established mortgage brokerage or become an independent mortgage broker by creating your own brokerage. The requirements for registering a mortgage brokerage can vary by state. Register the business with details, like your firm's name and location through your state's licensing authority.
As you register your brokerage, consider whether you want a physical location to provide your services or if you want to operate an online brokerage business. Some states require mortgage brokers to have a physical location. If you opt for a physical location, consider the price of renting a physical space and its accessibility to your customers. If you decide to have an online business, consider creating a home office that allows you to work with fewer distractions.
Related: How To Register a Business Name
5. Apply for your license and get your mortgage broker bond
After you pass the exam and register your business, apply for your mortgage broker license. Determine your state's requirements with the NMLS. Typically, states ask candidates to pass an exam, pay a licensing fee, get the right bond and submit an application to get a mortgage broker license.
Getting a mortgage broker license can involve securing a bond. A mortgage broker bond can help protect your clients if your brokerage breaks the rules or regulations while operating. It also helps prove your validity to your potential customers.
The amount of a brokerage bond you might need depends on your state. Mortgage brokers pay for a percentage of the total bond amount, meaning the amount they pay depends on various factors, including financial history and business details. Once you determine the amount of bond you need, apply online.
After you receive your bond certificate, sign it and send the certificate and your license application to your state's Department of Financial Services. After the state reviews and approves your application, you can receive your license.
6. Maintain your license
Most locations require mortgage brokers to maintain licensure, so it's beneficial to stay up-to-date with mortgage lending developments in your city and state. You can keep your license current by completing continuing education courses each year. Renewing your license annually can involve submitting proof of your continuing education. This keeps your license current and ensures you offer your clients relevant and updated loan information.
Related: 12 Types of Continuing Education
7. Continue your training
It's valuable to continue your training and education throughout your career. Consider taking online or in-person courses to help improve your industry knowledge and better understand various state and federal regulations. You can also prolong your training by maintaining positive relationships with other mortgage brokers who can help you learn about standard industry practices and stay updated with field developments.
How much does a mortgage broker make?
Mortgage brokers earn a national average salary of $98,109 per year. By comparison, senior mortgage brokers earn a national average salary of $234,570 per year. Your earnings can depend on your geographic location, experience, expertise and employer.
For the most up-to-date salary information from Indeed, click on the links provided.
Mortgage broker work environment
While some mortgage brokers work in an office space with other mortgage brokers and specialists, others may work from home. Regardless of where they work, many share the same working conditions. For example, mortgage brokers typically meet with clients in office spaces and communicate with lenders in person or over the phone. They may also have irregular hours, working nights or weekends depending on their clients' needs.
Frequently asked questions
What skills do mortgage brokers need?
Not only do mortgage brokers know the lending process, lending rates and lending institutions, but they also have many hard and soft skills to help them perform their job successfully. Here are some skills a mortgage broker needs:
Attention to detail: This can help them when reviewing the fine print of loan options, rates and terms in order to present their clients with profitable mortgage opportunities.
Interpersonal skills: Having strong social skills can make it easier to get along with individuals you work with and might make your job more enjoyable. To develop your interpersonal skills, consider being an active listener and practicing ways to speak positively and professionally to others.
Patience: Patience can help accommodate their clients' various schedules and wait for clients to decide on their loan options, plus remain positive in the face of lender rejections.
Negotiation skills: As a liaison between lenders and borrowers, having proficient negotiation skills can make it easier to secure profitable loans for clients.
Organizational skills: Staying organized can make it easier to manage your workload and provide your clients with a quality home-buying and loan approval process, plus ensure you can efficiently maintain and access necessary documents readily.
How is a mortgage broker different from a real estate agent or loan officer?
While mortgage brokers and real estate agents have a few similarities, they also have different job duties. A mortgage broker helps buyers find the financing they need to buy a property, whereas real estate agents help buyers and sellers find or sell real estate property. Although a mortgage broker may also seem similar to a mortgage loan officer, these roles function differently. Loan officers only offer mortgage options from their financial institution, whereas mortgage brokers match their clients with different lenders.
What is the job outlook for a mortgage broker?
The U.S. Bureau of Labor Statistics (BLS) reports an employment growth of 5% for real estate brokers and sales agents from 2021 to 2031. The BLS notes that demand for this role can increase due to the number of individuals needing brokers and sales agents when looking for a home, moving or seeking houses to transform into rental property as a secondary income source. More positions can also open as current brokers retire or change careers.
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