Launching your mortgage company is a whirlwind of excitement and anxiety. Business ownership is a buzz that can only be understood through experience. Simultaneously, there exists a liberating feeling and a sense of intimidation of captaining your own ship.

Like any business, starting a mortgage company requires careful planning and preparation. So, if you’re looking for guidance, you’ve come to the right place.

This blog will outline:

  • The current state of the mortgage industry.
  • The seven steps to take when launching your own mortgage company:
    • Choosing a business name and legal structure.
    • Writing a business plan.
    • Securing funding.
    • Obtaining the necessary licenses.
    • Developing marketing material.
    • Establishing your technical infrastructure.
    • Expanding your mortgage offering.

The State of the Mortgage Industry

Let’s rewind five years to understand a brief history of the mortgage industry. Demand for mortgages surged during the Covid-19 pandemic. Interest rates were low, making homeownership affordable for more people.

When the situation with the pandemic returned to a sense of normality, ‌demand for home mortgages did slightly weaken. This is nothing to worry about because the world was effectively hitting the “restart” button, and nearly every industry slowly reverted back to normal levels of demand.

The good news? In 2024, US banks predict increased demand for all types of loans (including mortgages) as interest rates are expected to fall again. And the Mortgage Bankers Association sets the current level of US Mortgage Originations at $377.00B, up from $333.00B one year ago (an increase of 13.21%).

Another unique element in the mix is the rise in mortgage lenders who aren’t traditional banks. Customers having more (affordable) options is likely to incentivize them into entering (or expanding into) real estate. Overall, the external environment makes 2024 a great time to start a mortgage lending business. So, what do you need to get a mortgage lending company off the ground successfully?

There are seven main steps.

Step 1: Choose a Business Name and Legal Structure

Your business name is a crucial part of your brand identity.

The name should‌:

  • Be available as a website domain. If you’re calling your business “ABC Mortgages,” make sure www.abcmortgages.com is available!
  • Be memorable and easy to spell/pronounce.
  • Make it clear you’re a mortgage loan expert.
  • Not already in use.

Struggling to come up with a name? Here are some business naming structures to jump-start inspiration:

  • Your surname and the word “mortgages” give your brand a familial and local feel.
  • Your niche and the phrase “mortgage solutions.” For example, “First-Time Buyer Mortgage Solutions” clarifies the type of home buyer you serve.
  • Location and the word “mortgage” to clarify the area you serve.
  • USP and the word “mortgage” or “home financing.” For example, Affordable Home Financing highlights your USP as someone who can help people with a smaller budget secure their first home.

You can also use AI business name generators to give you a hand!

Next is the business structure. Each has its pros and cons.

Sole Proprietorship and Partnership

A sole proprietorship is a company run by one person, while a partnership involves multiple owners. It’s easy to set up and has minimal regulatory requirements.

However, there’s no legal separation between the owner and the business, meaning personal assets are at risk if the business incurs debt or legal issues.

Limited Liability Company (LLC)

An LLC is a popular choice for small to medium-sized businesses because your personal assets are protected in the case of debt repayments, and there are tax benefits.

For instance, all gains and losses have the potential to be transferred to individual income without being subject to corporate taxes.

Corporation

A corporation is owned by shareholders. Although corporations offer the most robust protection against personal liability, they’re intricate and expensive to establish and sustain.

You have to keep up with strict regulatory and record-keeping requirements and face double taxation:

  1. On your company’s profits
  2. The dividends are taken by shareholders

There are ways around this, though. For a mortgage company, an LLC is your best option.

LLCs offer strong liability protection, which is crucial given the regulatory environment and financial risks associated with mortgage lending. The flexibility in management structure and tax benefits are advantageous, and they’re easy to set up.

A close second is corporations‌ – ‌this is something you can consider once you expand and start attracting external investment.

Step 2: Write a business plan

Your business plan document needs you to state the following information thoroughly:

  • The specific services you will offer
  • Financial projections
  • Strategies for growth

There’s a misconception about business plans. People think they’re only required if you’re trying to apply for funding from a bank or a VC. The assumption is incorrect.

Use a business plan template as your primary guide. That way, you don’t miss out on the critical component of running a mortgage company. Think of a business plan as a way to document and provide internal clarity on how your business will grow.

You wouldn’t travel to an unknown destination without inputting its zip code into a GPS. Similarly, a business plan is your roadmap‌. Use it to:

  1. Identify potential challenges and solutions
  2. Track progress
  3. Make good decisions in response to market changes and competition behavior

Step 3: Secure funding

To make money, you need to invest money. You need to know how you’re going to fund the start-up capital. Your options are:

  • Bootstrapping: You fund the business with your personal money.
  • A bank loan: Here, your business plan will need to be robust with no plot holes.
  • Investment from a venture capital (VC): These are like the people you see on Sharktank. They make a living by investing in other people’s businesses‌ – but they can be harder to convince than banks!
  • Personal investors. You might ask close family and friends.

Whichever method(s) you choose, make sure you have the necessary resources to make a convincing argument. Overall, you’ll need to prove:

  • You have something unique that separates you from other brokers. A clear USP that makes you a favorable choice when pitted against competitors.
  • Some social proof. Perhaps you’ve seen demand for your services, or you’ve been bootstrapping and have collected enough evidence to state the case that the business can grow with external funding.
  • Evidence-based financial projections. Don’t think of numbers out of thin air.
  • A vested interest. Why do you want to start a mortgage lending business? Maybe you have worked in the industry and have seen some of its issues that you feel you can resolve by starting your own company. Or you have a unique way of delivering the service. Everyone starts a business to make money, but external investors often need a more compelling reason.
  • Demand: There is a want and need for mortgage brokers.

Step 4: Obtain the necessary licenses

You can’t offer mortgages without the required licenses. You’ll need to secure the necessary licenses from state and federal regulators, such as the Nationwide Mortgage Licensing System (NMLS).

Other necessary approvals might include business entity registration, surety bonds, and compliance with the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act). Ensuring all these licenses are in place is essential for legal compliance and operational legitimacy.

All this is assuming you have the necessary license to act as a mortgage broker. Check the FCA if you’re unsure.

Step 5: Create your marketing material

To acquire clients, they need to know you exist – that’s called marketing!

You’ll need:

  • Branding. This includes designing a logo and your business colors. These will be consistent with your digital and print materials.
  • A mobile-friendly and well-written website that clearly explains who you are and how you can help. Consider writing SEO blogs where you share your curated expertise and knowledge that would help prospective buyers, covering topics like the cost of home ownership.
  • Print materials like A5 flyers for door-to-door distribution and business cards for people who enter your physical shop and for when you go to networking events.
  • Social media presence. LinkedIn is the best platform for building awareness and creating professional connections with clients and other lenders. You, as the business owner, need to be active on LinkedIn by regularly posting, commenting, and adding new and relevant connections, all with the view of building your reputation.
  • A Google Business profile (formerly Google My Business) ensures that your business appears on Google whenever people in your area search for mortgage lenders near me.
  • An email marketing system. When you start collecting email addresses, you can plug them into an email marketing software like Mailchimp to write engaging newsletters.
  • Join relevant membership bodies like the Mortgage Bankers Association, the American Bankers Association, and the National Association of Mortgage Brokers. Such bodies help you keep up with regulatory requirements, industry updates, and continuous education and are a source of making connections that can lead to commercial partnerships.
  • Invest in paid advertising. For example, use PPC campaigns to artificially reach your ideal customers.

Additionally, you’ll need to be on the move!

Attending networking events is a great way to establish in-person contacts and a way of letting people know you exist. Furthermore, industry events are a great way to showcase your business to interested parties and stay up to speed on industry developments.

Step 6: Establish a technological infrastructure

Setting up the required technology infrastructure is essential for the smooth operation of a mortgage company. This includes implementing a robust, efficient and compliant Loan Origination System (LOS) to streamline loan applications.

Additionally, Customer Relationship Management (CRM) software is vital for managing interactions with clients, nurturing leads and maintaining strong relationships with customers. Equally important is a reliable accounting system to handle financial transactions, manage budgets, and ensure accurate financial reporting.

And what about all of that data?

Secure data storage and backup systems are paramount when starting any company. However, keeping costs in check is equally essential during the initial stages. Thankfully, cloud-based solutions offer a win-win scenario. Cloud providers like AWS provide robust security features and offer information to understand pricing.

You can estimate and fine-tune your cloud storage and backup expenses by leveraging AWS backup pricing strategies.

Understanding these costs and how to reduce them allows your new mortgage company to save pennies, which add up significantly over time.

Step 7: Expand Your Mortgage Offerings

As your business grows, diversifying your mortgage options becomes key to drawing in diverse clientele.

One valuable option to include as you scale is FHA mortgage loans. These loans, backed by the Federal Housing Administration, cater to first-time homebuyers and individuals with lower credit scores.

It requires a smaller down payment and has more lenient credit requirements than conventional loans, making homeownership more accessible.

That’s just one example of many. Here are some other mortgage offerings to explore as you grow:

  • Adjustable-rate mortgages (ARMs)
  • Shared appreciation mortgages
  • First-time homebuyer programs
  • Home equity loans (HELOCs)
  • Interest-only mortgages
  • Fixed-rate mortgages
  • Reverse mortgages
  • Balloon mortgages
  • Construction loans
  • Jumbo loans

Wrapping up

Starting a business is exciting but requires you to get your head down and logically and thoughtfully plan your launch. The seven steps we mentioned will give your business a lift-off and put you in a capable position to scale. Good luck!