You have a licensing project: to obtain a mortgage license in order to start operating as a mortgage broker. Of course, you have to go through the usual process of state business registration. On top of that, however, you will also need this specific state licensing, which is an additional factor in terms of time and financial resources. Maybe you would like to develop your activities nationwide as well. Then things get even more interesting, as you have to apply for mortgage licenses for each state individually, and the costs of the complete licensing process can turn out quite high. All of this should certainly not dishearten you because, as they say, if there is a will, there is a way – and even though there are some set costs, there certainly are ways to save on the licensing process.
Actually, the mortgage licensing process varies greatly across the U.S. States have different rules in terms of having a physical office, allowing mortgage brokers to loan on mortgages and requiring mortgage brokers’ employees to obtain licenses as well. When it comes to costs, there are two major expenses linked to mortgage broker licensing: the state applications fees that are set for each of the 50 states and a surety bond for each state you would like to get licensed for as well.
State Application Fees for Licensing
As a rule, states require a non-refundable application fee for any mortgage broker licensing application, which is paid through the application on the Nationwide Mortgage Licensing System (NMLS) website. The fees vary greatly between states and are in the range of $200 to about $1600. There is usually a NMLS processing fee as well. If you would like to reduce your initials costs when launching your mortgage brokering business, you might want to concentrate your operations only in states with lower application fees, or make a combination of various states, depending on your business goals.
An essential part of the licensing process is obtaining a surety bond for your mortgage brokering business. As with other surety bonds, the mortgage broker bond is not a protection for you, as the common misconception goes. Actually, the bond provides security for your clients, as it guarantees you will follow the rules of your state, and is a form of credit given to the broker. The professional liability insurance is the one that provides protection for you in case there is a claim against you.
So, how much?
The surety bond premiums are set as percentage rates of the surety bond amount, which is based on personal credit and can be estimated in advance. It is possible to get bonded with bad credit, but naturally, it will increase the bond price. Although most surety bond agencies look at a variety of factors in estimating the bond price, which means that often one criterion can raise the costs considerably, there are surety companies that focus only on the credit score. Thus, if you would like to have the lowest possible bond price, you have to worry only about improving your credit.
In case you have decided to operate in more than one state, there is a tricky part of the business: you would have to get bonded individually for each state requiring a bond. It is good to check the requirements of the places you would like to locate your business and evaluate the complexity of the process, as some states might even require you to obtain bonds for your branches and loan originators. It might be difficult to obtain licenses for all 50 states because of surety credit limitations, but the bonds can be combined into bulk programs by your surety bonds agency, thus enabling exceeding of the limits and allowing you to get bonds in as many states as you need.
Saving on mortgage broker licensing then is not impossible, but it requires a multipronged approach. The most important tip is to carefully analyze the states you would like to operate in and to get a flexible and customer-friendly surety bond agency.