Over the last several years, the mortgage business has rebounded impressively in terms of the number of people purchasing or refinancing a home. Mortgage brokers make up an important part of the industry, as they work as the men and women connecting homebuyers to lenders.
Becoming a mortgage broker can be a profitable career move, whether it is for a company or as an independent broker in the business. However, there is often a point where working in the same city or state has its limitations. There are only so many homebuyers and homeowners one can reach in a specific location, prompting some to expand their reach to new regions.
Growing a mortgage brokerage business beyond state lines requires more than a drive to do so. There are licensing requirements one must recognize and understand, as well as mortgage broker bond needs and the expenses that come with each. Professionals considering expanding a mortgage brokerage business into a new state need to check licensing requirements, select a surety agency, and prepare a budget to do so successfully.
Check licensing requirements in advance
The first step in growing a mortgage broker business to extend beyond state lines is to understand the licensing requirements of brokerage businesses in surrounding states. Any individual working as a mortgage broker must be licensed to do so, and the requirements for this license vary from state to state. Before opening doors in another location, brokers need to be well-versed in these requirements for licensing ahead of time.
State requirements for mortgage broker licensing can be found through the NMLS database. However, locating specific licensing needs can be a cumbersome and time-consuming process. Another place to consider researching these requirements is the surety agency that provides a state-specific mortgage brokerage bond. The surety agency can offer some insight into what is needed to get a license in a different state, and any specific rules and regulations one needs to follow in order to operate a brokerage business legally, including the surety bond requirements.
Work with the right surety agency
Once mortgage broker licensing requirements in the new state where expansion will take place are understood, brokers are required to secure the right mortgage broker bond. Surety bonds are put in place so that customers of industry professionals are protected, and they are necessary as part of the licensing process in nearly all states. A bond for a mortgage broker may vary in the amount needed based on state guidelines, so it is helpful to work with a surety agency to determine what is necessary to expand a business.
Some mortgage brokers think that working with a new surety agency in the state where the business will expand is a smart choice. However, that may not be necessary. A surety already know a broker’s business history, and they can provide helpful tips on how to get a mortgage broker bond in the new state where operations will take place.
Budget for the added cost
Growing a mortgage broker business into another state also requires budgeting for added costs. Meeting the licensing requirements of the state in which the business plans to operate is an expense, as is the cost of a new surety bond in that state.
While brokers cannot minimize the cost of licensing for a mortgage brokerage license, reducing the cost of a surety bond is possible. Bonds are priced as a percentage of the total bond required, and this percentage is based heavily on the broker’s financial state. If credit is an issue or a broker has had claims against a bond in the past, the cost will likely be higher. Keeping these problems to a minimum reduces the cost of a bond, which ultimately brings down the total budget requirements for expansion.
Brokers can check personal credit history and score before applying for a new mortgage broker bond. Also, having business financials organized and up-to-date in case the surety agency asks for this documentation decreases the cost of a new bond. For brokers who want to expand beyond state lines, understanding licensing and bond requirements as well as the cost of each makes the process less daunting.