By Vic Lance of Lance Surety Bond Associates
When one of the nation’s leading builders, Lennar Corp., expresses new hopes for the U.S. housing market
, then we’d better pay attention. The company reported 18% increase of sales orders in the fiscal first quarter, compared to the same period in 2014.
This is good news, and in case you’ve been thinking of starting up a mortgage brokerage, the time may be right.
You can find a lot of information about how to become a mortgage broker, but what about saving some money in the process?
There are mandatory federal and state licensing fees that you cannot escape, but you can cut down on some other expenses when setting up your business initially. Let's take a look.
Necessary Manageable Expenses
- License. No business can be conducted without proper licensing. Fees and requirements vary from state to state. Some states may charge up to $300, others charge $450, and Illinois wants you to pay $2,800 for residential mortgage license. Visit the Nationwide Mortgage Licensing System (NMLS) site to learn more.
- Uniform State Test (UST). Launched on April 1, this test has been adopted by 46 state mortgage agencies so far. It has two parts – a national test with 125 questions and a fee of $110, and a state-specific test with 55-65 questions and a fee of $69. Again, check with your state administration to see if the UST is a requirement.
- Surety bond. Every state determines the bond amount, which may vary from $25,000 to $75,000, or more. You'll typically pay between 1% and 7.5% of that sum, based on your credit and financial standing.
- Professional liability insurance. It's not mandatory, but it's not a bad idea to obtain it in case something goes wrong down the road and you get sued. Normally the insurance is up to $1 million, and deductibles can range from $1,000 to $25,000 for each claim.
Lower Your Costs
- Renting an office and buying office equipment. These expenses can be easily managed by investing in cheaper options. Or better yet, hire an accountant.
- Marketing. Don't overspend on elaborate marketing campaigns. Think of a good online marketing strategy and develop all possible social media outlets.
- Funding. If you don't have the startup capital, take a small business loan, but don't go overboard with it. Stick to your business plan.
Are You Thinking of Starting Your Mortgage Brokerage?
- Credit History. Before you embark on any enterprise, make sure you have an excellent credit score, because every move you make will depend on it. Your premiums on bonds and insurances are tied up to it.
- The Bonding Agency. Turn to a well-known and experienced bond agency. The more your bonding agency knows about the industry, the more likely they are to find you the best deal on your bond. If you want to operate in more than one state, they can give you larger bond limits. Also, with a larger bond agency you can get approved online, which saves you time and cuts costs.
- Keep your finances in good standing. If you demonstrate financial stability, you are sending a positive message to the world that you are reliable and your business is likely to grow and prosper. Then you can always secure lower interest on loans, better bond underwriting conditions, and more clients.
Share your thoughts with us and tell us what are your biggest concerns and how are you planning to deal with them. Was the information is this article useful for you? If you have more suggestions on how to cut startup costs, we'd be more than happy to hear from you. Let us know in the comments below.
Vic Lance is the founder and president of Lance Surety Bond Associates. He is a surety bond expert who helps mortgage brokers get licensed and bonded. Vic graduated from Villanova University with a degree in Business Administration and holds a Masters in Business Administration (MBA) from the University of Michigan’s Ross School of Business.