How to Become a Mortgage Broker

Mortgage brokers are licensed professionals that work as intermediaries between home buyers and lending institutions. Unlike loan officers that work directly with lenders, mortgage brokers work directly with borrowers to connect them with the mortgage lender who can provide them with the best financing options for their upcoming home purchase.

Because mortgage brokers play such an important role in the real estate industry, state and local governments require all brokers to receive a license before being eligible to legally practice as a broker.

In this guide, we’ll outline a step-by-step process on how to become a mortgage broker.

Take the pre-licensure mortgage broker class

The first step to becoming a mortgage broker is meeting the pre-licensure education requirements. At a minimum, you’ll need to have a high school diploma or a GED certification.

Additionally, the National Mortgage License System (NMLS) requires mortgage brokers to complete 20 hours of pre-licensing training courses. This consists of:

  • 2 hours of non-traditional mortgage lending courses
  • 3 hours of ethics courses
  • 3 hours of federal law courses
  • 12 hours of electives

Training and exams must be completed within three years of submitting your mortgage broker application. You can access all the classes through the NMLS website.

Pass the National Mortgage License System (NMLS) test

After completing the NMLS training, you’ll need to pass the SAFE Mortgage Loan Originator Test. The test assesses your knowledge of the course material, including both state-specific regulations as well as general mortgage brokering practices.

The exam comes in two parts, broken into federal and state focus areas. You must answer at least 75% of the questions correctly to pass each exam.

More information about testing locations and scheduling your exam is available through the NMLS website.

Register your mortgage brokerage business

After you complete the necessary coursework and pass the exam, you’ll need to register your mortgage brokerage business. The exact requirements will vary between states, but you can expect to complete the following steps:

  • Choose a business name
  • Determine your business structure (partnership, LLC, corporation)
  • Get an employer identification number (EIN)

Once you’ve completed these steps, you can register your business through the appropriate state licensing authority.

It is important to understand your state’s requirements regarding your business location. Some states allow you to either have an online brokerage or physical location while others will require you to have a brick and mortar space.

If you choose to open a physical place of business, you’ll need to consider the cost of the property (or the cost of rent), how close it is to your potential customers, and what hours the location will be open for business.

Meet the mortgage broker license requirements

With your business in order, it’s time to get your mortgage broker license. There are standard federal laws regulating the mortgage industry, but there are also state laws that will determine what steps you need to take to secure your mortgage broker license.

You can see the specific requirements for your state by visiting the NMLS State Licensing page.

Below are some of the universal requirements:

  • Providing fingerprints for an FBI background check
  • Submitting your current financial statements
  • Completing all pre-licensing education requirements
  • Granting the NMLS access to your credit report

Post a mortgage broker surety bond

Most states require mortgage brokers to post a mortgage broker surety bond as part of the licensing process.

A surety bond is a three-party agreement between the mortgage broker, the government agency responsible for licensing mortgage brokers, and a surety company. The bonds provide financial protection to governments and consumers, ensuring that the mortgage broker will conduct their business ethically while complying with all applicable regulations.

When a mortgage broker violates the licensing regulations in a manner that damages another party, the damaged party can file a claim against the bond. If the claim is valid, the surety company will pay the affected party damages up to the total amount of the bond. The mortgage broker is ultimately responsible for reimbursing the surety company.

Each state has its own requirements for the total bond amount needed from mortgage brokers. Some states have a set amount for every broker while others scale the required bond amount based on the broker’s aggregate loan volume.

Mortgage brokers are not required to pay the entire amount of the bond upfront but instead only need to pay a premium, a small percentage of the total amount. The premium you need to pay varies on an individual basis and is determined by the surety company. 

When determining your premium rate, the surety company evaluates a variety of factors including your financial history, credit score, industry experience, and other business details. Premium rates for most mortgage brokers fall somewhere between 0.75% and 5% of the total bond amount.

Submit your mortgage broker license application

Once you’ve satisfied all necessary requirements and have posted the appropriate surety bond, you can fill out the application forms and send them to the state licensing agency. 

New applicants will likely need to provide additional details about their business in the application including a list of executives as well as an organizational chart.

After the state agency reviews and approves your application, they will mail you your mortgage broker license. From there, you are ready to begin your work as a licensed mortgage broker.

Mortgage broker licenses are only valid for a finite period of time. In order to renew your license, you must complete yearly continuing education courses. This includes a total of eight hours of training.

Apply for a mortgage broker bond online with EZ Surety

When you’re ready to start the mortgage broker licensing process, EZ Surety can offer you a free online quote for your mortgage broker surety bond. We provide competitive premiums and quick turnarounds for individuals of all financial standings. Get in touch today to learn more.