How to Become a Mortgage Broker in 6 Steps

How to Become a Mortgage Broker

If you’re curious how to become a mortgage broker, a good place to start is by defining what they do and the state of the mortgage industry. Mortgage brokers ensure the mortgage lending process goes smoothly for all involved (individuals, businesses, and lenders) and serves the interests of both parties.

Estimates suggest that around 16% of all mortgages originate through a broker. Considering that tens of millions of mortgages originate each year, that’s quite a large number. Plus, reliance on mortgage brokers – rather than borrowers and lenders working together directly – has increased for 10 quarters in a row. 
For ambitious individuals, those growth figures suggest an in-demand occupation with unlimited earning potential. Mortgage brokers can also take pride in knowing they’re helping people find a place to live. If this sounds like an appealing career, now is an ideal time to join the industry and become a mortgage broker – but there are requirements you must complete first.

Follow the steps below to put your mortgage broker career on the fast track:

Step 1: Complete the Education Requirements

Every state regulates the mortgage industry, including brokers, according to its own standards, but the procedure for becoming a mortgage broker is handled by a national organization called the Nationwide Multistate Licensing System and Registry (NMLS) that standardizes the process. 

The NMLS requires all mortgage brokers to meet minimum education requirements. They must have at least a high-school diploma or GED. College degrees are helpful but not mandatory. Brokers must also complete a 20-hour mandatory training course before taking a licensing test.
The course covers several subjects:

  • Federal Law – 3 Hours
  • Ethics – 3 Hours
  • Non-Traditional Mortgage Lending – 2 Hours
  • Electives – 12 Hours

Various mortgage broker schools offer the courses outlined above. Brokers can also seek out additional training from the National Association of Mortgage Brokers, which offers certifications to become a Certified Residential Mortgage Specialist, Certified Mortgage Consultant, or Advanced Mortgage Consultant. Though not required, these certifications can help someone bolster their credentials upon starting a new career. 

Step 2: Pass the Required Test

Beginning with the passage of The Secure and Fair Enforcement for Mortgage Licensing Act in 2008 (SAFE Act for short), all mortgage brokers must pass a pre-licensing exam. Most will take the National Test with Uniform State Content, which applies to brokers in most states. In states that haven’t adopted this test as the only examination requirement, brokers will have to pass an additional State Component Test with questions specific to that state’s mortgage laws. Be prepared to pay a fee for the universal test (currently $110) and for the state test (currently $69). Both tests require a grade of 75% or higher to pass.

Step 3: Register Your Company & Business Name

Brokers must register as a business entity in the state where they plan to work before being granted a license to work there. During registration, a broker will need to select what type of company he or she intends to operate as:

  • Sole proprietor
  • Partnership
  • Limited liability company
  • Corporation

There are pros and cons to each of these options, as well as implications for all the business owners and the plan they intend to follow, making it important to choose wisely. Brokers will also need to choose a name for the business. Any business planning to hire employees should also get an Employee Identification Number (EIN) from the IRS, which involves a simple online form and no fee. 

Step 4: Obtain a Mortgage Broker Bond

Most states require mortgage brokers to obtain a mortgage broker surety bond as part of the licensure requirements. This type of surety bond holds a mortgage broker financially liable if they break state laws that result in damages to individual clients of the public at large. Should that happen, victims may file a claim for compensation against the surety bond, and they receive a guaranteed settlement provided the claim is true. The surety agency that backs the bond will pay this settlement, but the mortgage broker who caused the claim must pay that debt back or enter collections. For more details about how mortgage broker surety bonds work, contact Viking Bond Service.

To obtain one of these bonds, a broker will need to find a surety agency, submit an application, agree to a credit check, and turn over additional documentation as necessary. The surety will then quote a price for the bond premium. Prices depend on how large a bond mortgage brokers need, which varies by state. Texas, for instance, requires a $50,000 bond while California requires a $20,000 bond. Prices also depend on the applicant’s credit standing. Expect to pay a small percentage of the total bond value.  

Step 5: Submit a License Application

Individual states have different licensing requirements to become a mortgage broker, but if the previous five steps are complete at this point, the hard work is already done. Other common requirements to complete the license process may include: 

  • Providing financial statements
  • Fingerprinting and undergoing a background check
  • Credit check

Some states will also require brokers to secure a physical business location before getting licensed, but most states allow brokers to operate entirely online. As for cost, licensing fees range from $1,000 to $2,000 annually. 

Step 6: Keep Your License Valid

A mortgage broker caught operating without a license faces strict penalties, including permanent loss of license, rendering a career in the mortgage industry over. With so much at stake, it’s vital to keep a license active and in good standing without exception. That involves two key components:

  • Mortgage Broker License Renewing the license annually and complying with any and all mandates from the state agency that regulates mortgage brokers
  • Mortgage Broker Bond Renewing the surety bond annually and doing everything possible to avoid claims. Brokers should also pay for any claims immediately instead of relying on the surety agency to settle. Why? Because a surety required to settle claims may then cancel a surety bond agreement, this could lead to a lapse in bond coverage that invalidates a license. 

Viking Bond Service A Partner to Mortgage Brokers

Meeting the requirements to obtain a mortgage broker bond and become a mortgage broker are both common and important – but managing them can often be confusing and tedious. That’s where Viking Bond Service comes in. As a nationwide surety that can issue appropriate mortgage broker bonds in all 50 states, we can help anyone meet their bond requirements. More than that, we go above and beyond to offer fast and friendly service backed by exceptional support. 
How much would your mortgage broker bond cost? Request a no-cost, no-obligation quote to explore the answer, and expect to get a number back in under 24 hours! Do you have more questions about how to become a mortgage broker or surety bonds more generally? Call us to answer your questions at 1-888-278-7389 or contact us at your convenience.