How to start a mortgage loan processing company in 5 steps

When starting your own mortgage loan processing company, remember this key tip: market, market, market

How to start a mortgage loan processing company in 5 steps

Mortgage processing companies play a key role in getting their clients’ home loan requests to the final close. Mortgage loan processors are responsible for assembling, administering, and processing mortgage application paperwork before it gets approved by the loan underwriter.

How do you become a mortgage loan processor? And beyond that, how do you start a mortgage loan processing company?

In this article, we will answer these questions and more to help you on your journey to starting your own mortgage loan processing company.

What does a mortgage loan processor do?

Before we get into how to start a mortgage loan processing company, let’s first define what a mortgage processor does.

A mortgage processor prepares their clients’ home loan application file and other paperwork for delivery to the mortgage underwriter. As a loan processor, you gather documents to verify all the information on your clients’ applications. This includes the following:

  • Pays stubs
  • W-2s
  • Credit reports
  • Bank statements

Then, you work with the client’s loan officer to ensure their financial profile meets the lending guidelines for the mortgage program they have selected.

Keep in mind, however, that loan processors do not have a license to provide their clients with advice on the best loan program, interest rates, or closing costs. If your clients need help in this area, be sure to point them to their loan officer. They are the only ones who can legally answer those questions for your client.

A loan processor is also different from a mortgage broker. To find out more about this role, read our guide on how to become a mortgage broker.

Key responsibilities for a mortgage loan processing company

Now that we have a general understanding of what a mortgage loan processor does, let’s look at some of the key responsibilities of a mortgage loan processing company. Here are seven functions that most loan processing companies perform:

  1. Review financial documents
  2. Request credit report
  3. Request verification of application information
  4. Order title work/appraisals
  5. Collaborate with underwriter
  6. Ensure everything runs on schedule
  7. Prepare loan file for closing

Next, let’s go over each of these responsibilities:

1. Review financial documents

Typically, loan officers review the client’s financial documents. Mortgage loan processing companies do, however, double-check the finer details. These details include determining whether income documents are legible, earning calculations are accurate, and all bank statement pages are there.

2. Request credit reports

Mortgage loan processors also collect letters of explanation from clients for clarification if there are outdated addresses or late payments and collections on clients’ credit reports. Other credit report documents include if the client has past bankruptcies, unpaid child support, or any court documents that are not easily available through public record databases.

3. Request verification of application information

Occasionally, underwriters require written verification of employment from a client’s bank account(s). As a mortgage loan processor, you would submit a form for the client’s bank or employer to fill out. This information can also be requested electronically, for online mortgages. You can also request special documents for loans backed by the FHA, the VA, or the USDA.

4. Order title work/appraisals

Mortgage loan processing companies also work with an escrow or title company to gather information about the home the client is purchasing. This is done in part to ensure it is free of any ownership claims.

If a property appraisal is required, loan processors collect a fee from their client to pay for it and schedule it with an appraisal company.

5. Collaborate with underwriter

After the client receives a conditional loan approval, the mortgage loan processor collects outstanding documents needed to resolve it.

Loan processors also take care of last-minute changes to finalize the client’s loan package. This could include fixing typos in the home appraisal report or requesting information about the client’s homeowner's insurance company. Essentially, anything to get the client’s loan ready for closing.

6. Ensure everything runs on schedule

Mortgage loan processing companies pay close attention to contract deadlines that are spelled out by their clients’ home purchase agreement. Not only that, but processors keep track of clients’ mortgage rate lock expiration date. This helps clients to close on time and avoid expensive lock extension fees.

7. Prepare loan file for closing

Finally, mortgage loan processing companies partner with an escrow or closing agent to prepare the client’s paperwork for closing. This happens after the underwriter has cleared all the loan conditions and provides the client with a green light to close.

Processors communicate with the escrow or title company to schedule the signing. They also verify how much money the client needs at the closing table to make the down payment and pay closing costs.

How do I start my own mortgage processing company?

Starting your own mortgage processing company may sound like a daunting task, but don’t worry. Breaking down the process of starting your own mortgage company helps to demystify the whole endeavor.

There are 5 steps to start a mortgage loan processing company:

  1. Hire mortgage processors that meet licensing requirements
  2. Create a business plan
  3. Register the business entity
  4. Set up office space
  5. Market, market, market

Learning how to start a mortgage loan processing company? Market, market, market.

1. Hire mortgage processors that meet licensing requirements

If you want to start your own mortgage processing company, you must develop a diversified skillset that works well within the financial industry. The mortgage loan processors you hire should also meet the same criteria.

Mortgage loan processors must gain as much experience as possible through online financial courses and on-the-job training. Most loan companies require their loan processors to have, at minimum, a high school diploma.

It is highly recommended that you hire processors with an associate degree in finance, banking, business, or a related subject. You want them to start off with the basic concepts of banking practices and financial management.

Mortgage loan processors must also receive your mortgage license through the National Mortgage Association of Mortgage Processors or NAMP. Through the NAMP, you can complete comprehensive mortgage processing training and test to earn your mortgage license.

2. Create a business plan

When starting a mortgage loan processing company, your business plan will help you map out the specifics. Here are key considerations when creating a business plan:

  • Business name: Your company’s name should be unique and easy to market. Here are other things to be aware of: state and federal trademark records; social media platforms; and web domain availability.
  • Startup/ongoing costs: Tests and licensure fees comprise the majority of your startup costs. The ongoing expenses, on the other hand, will ultimately depend on your negotiating abilities and your business sense. The most common ongoing costs are rent, office space, taxes, staff payroll, and insurance.
  • Target market: Your target market depends on your chosen niche. The broader your niche, the wider your target market will be. But remember that the wider your target market, the more money you will spend on marketing.

3. Register the business entity

Most mortgage companies register as a limited liability company (LLC), sole proprietorship, partnership, or corporation. Whichever legal structuring you decide on will have tax consequences. For this reason, it is important to consult with a business attorney first.

Next, you must file with the IRS for a tax identification number and Employer Identification Number. Both are requirements for running a business in the US. Your state might also have its own requirements.

4. Set up office space

The size of your business, your rental fee, and your staff capacity will determine your office space. How many mortgage loan processors do you plan on hiring in the beginning? Obviously, you will want to keep your ongoing costs as low as possible, especially as a startup.

The next part of the process is to determine the equipment you need to start operations. This includes computers, internet connection, furniture, telephones, signs, and more. A good tip here is to start small and upgrade as you go.

5. Market, market, market

Some of the most important marketing tools at your disposal include a company website, social media pages, and a customer relationship management (CRM) platform.

To up your networking game, you can order business cards as your company starts attracting a steady stream of clients. Remember to ask for referrals wherever you can. It is one of the most tried and true methods of marketing in the mortgage industry.

What qualities do you need to be a mortgage loan processor?

To become a mortgage loan processor requires certain qualities. In this section, we’ll discuss some of the qualities all successful mortgage loan processors possess.

Good communication

To be a good mortgage loan processor, you must have a good relationship with the client and the underwriter. Building rapport is essential.

The mortgage process is complex. If you can communicate the steps and requirements clearly, concisely, and effectively, you will put the client at ease. You can make yourself a trusted mortgage loan processor by explaining terms, answering questions, and guiding clients through tricky conversations.

Attention to detail

Mortgage loan processing involves so many numbers and so much paperwork. Even small errors can not only derail the process but compromise your clients’ trust. It is therefore important to pay close attention to detail, ensuring that everything is accurate and accounted for.

Stay informed

Because the mortgage industry is always evolving, it is important that you keep learning and stay updated on any industry changes. This is especially important when it comes to loan programs and eligibility changes that may affect your clients. In other words, you should stay as up to date as possible on all the latest mortgage industry news.

Starting a mortgage loan process company begins with education

If you want to start a mortgage loan processing company, it is important to know what makes a good loan processor. This means knowing both the licensing and educational requirements, as well as the skillset that you want in your employees. Next, you must create a business plan, set up office, space, and market, market, market.

To find out more about how to start a mortgage loan processing company, get in touch with one of the mortgage professionals we highlight in our Special Reports section. Here you will find the top-performing mortgage professionals across the USA.

Did you find these tips on how to start a mortgage loan processing company useful? Does it make you more likely or less likely to start your own mortgage loan processing company? Let us know in the comment section below.