How to Start a Mortgage Broker Business
Becoming a mortgage broker can be very profitable. And in fact, it might not be as hard to get into the business as you think.
Simply put, the income potential for being a mortgage broker is unlimited. Its certainly possible to become a millionaire doing this (as many brokers have); but its also very possible to lose money (as many brokers have done as well).
So, today I will take a look at successful strategies that will help you become a wealthy mortgage broker. To do this, we need to look at the potential market size, competition, investment required, and marketing tactics.
Market Size
If there is one thing that MOST financial advisers can agree upon, its that individuals TYPICALLY need a mortgage in order to purchase a home. Since there are nearly 300 million people in the US, that makes for a lot of home buying.
So, without going into much detail, I think its safe to say that there will always be a market for people needing a mortgage. Hence mortgage brokers will always be in demand. Obviously this demand will ebb and flow with the rise and fall of the housing market, interest rates, and overall consumer confidence. However, there will ALWAYS be some demand.
Competition
Unfortunately, the competition in FIERCE (w/ a capital F)! Not only are there lots of local mortgage brokers in your home town, but all of your banks, credit unions, and other financial institutions do home loans as well. Not only that but “Mortgages” is one of the most highly competitive keywords on the internet! Thousands of online companies are all fighting for customers.
So, if you want to venture into this business, just realize it will not be easy. I don’t want to scare you, but maybe just knock some sense into you if you thought everything would be peaches and cream. That just means you need to focus; you need a strategic approach to your mortgage company.
Marketing and Strategy
A well planned strategy will allow you to stand out from your competition. What makes you different from the local bank? Can you offer better rates? What makes you different from the small mortgage broker down the street? I wouldn’t recommend trying to be the lowest priced company as your main strategy. This is a hotly contested market and money really is a commodity. Meaning just about everyone can offer the same rates. There may be times that you can quote a lower rate, but I wouldn’t rely on this strategy.
One potential strategy is to position yourself as an expert in the field. Become a certified mortgage planner. Mortgage Planners are like a cross between a full financial advisor and a mortgage broker. Other strategies to differentiate yourself: Hold seminars. Develop and print a financial plan for customers. Teach a course. Write a book. Start a blog. Have an email list. Whatever you can do to establish yourself as a notch above the competition.
Now of course, you will have to also employ the typical marketing tactics used in the industry. However, if you can emphasize your differences (such as being a certified mortgage planner), you will get a better response than simply quoting rates (although this is important too). Here are some potential marketing tactics for obtaining more customers:
1. Give Seminars
2. Direct Mail
3. Network with other professionals (Financial advisors, real estate agents, CPAs, etc).
4. Blog
5. Adwords (have a website)
6. Auto-message dialer
7. Classified Ads
8. Flyers delivered to homes
9. Yellow pages
10. Friends and Family Network
11. Referrals from customers
12. Press (Do something unique and get in the paper).
13. Ads in local Home buyer magazines
14. Contact businesses and offer to give employees free financial analysis/seminar
15. Online article marketing (like eZine articles)
16. Joint-ventures
17. Business cards in books at book store
18. Trade shows
19. Join local Real estate clubs (or other clubs).
20. Go to realtor open houses
21. Use MLS listings - contact people about to sell homes.
22. Bulk email lists
23. Purchase internet leads
24. Develop partnerships with local professionals
25. Movie theatre ads (pre-movie)
These are just a few marketing ideas; there are a lot more. Some of these are more effective than others.
Notice that I did not put cold calling on this list. Cold calling/Telemarketing has been the staple of the Mortgage industry in the past. However, I would not implement this strategy because: homeowners don’t like it, the government has a do not call list which will continue to grow, and cold calling really doesn’t work very well.
Profit Potential
We mentioned briefly that the sky is the limit in this business, and it really is. The investment required is a phone line, a computer, and a positive attitude. Check with your local state government to see what sort of licensing requirements are needed. They will have all the information you need. Once you pass a test, you are in business (pending a few other items).
The average mortgage broker will make about 2 points per mortgage. In other words a $200,000 mortgage will pay the broker (you) about $4,000. Now of course you will have some expenses for processing loans, etc; but you can see how quickly this can add up. A top broker will do 10 loans in a month (some do much more than this). That’s as much as $40k per month.
The average broker should be doing 4 - 6 per month. The exciting part about this business comes when you are well established, and can start hiring loans officers to work under you. Then you start to make 30% or so on the loans that THEY close, plus your own. This is how the millionaire mortgage brokers are made.
There is much more detail needed to start this business; however, this should give you a good overview of what it would take to become a mortgage broker. An excellent book on how to be a mortgage broker is: Your Successful Career As a Mortgage Broker
What do you think about the mortgage broker business? Was there anything that I missed? Is there any other business ideas that you would like me to analyze?
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