There are many things to consider when starting a mortgage bank, such as licensing, regulations, and the competitive landscape. However, by following some simple steps, you can set your business up for success.
Here are the ten steps you can take to get started on building your very own mortgage bank business.
10 Steps to Launching a New Mortgage Bank Business
1. Choose Your Type of Mortgage Bank Business
The first step in launching a mortgage bank business is to identify the type of mortgage bank business you want to launch. You might choose from the following types, among others:
- Depository: This type of mortgage bank will take deposits from customers and use those funds to make loans.
- Brokerage: This type of mortgage bank will not take deposits but will instead work with other financial institutions to find the best loan options for their clients.
- Correspondent: This type of mortgage bank will originate and fund its own loans but will also sell some of those loans to other financial institutions.
Learn more about the types of mortgage bank businesses.
2. Name Your Mortgage Bank Business
Give your mortgage bank business an identity so people will consider it a well-known and respected brand. You can take the name of your mortgage bank business from your industry, focus on a geographical location, or use your name among other options.
The main goal of naming your mortgage bank business is to make it sound appealing and trustworthy so that potential customers will be interested in doing business with you.
3. Determine Your Mortgage Bank Business Model
There are several possible types of business models for a mortgage bank business, including:
- Online Mortgage Bank: You can operate your mortgage bank business entirely online. This could involve working with customers to help them fill out applications and providing them with other resources online.
- Brick-and-Mortar Mortgage Bank: You can open a physical location for your mortgage bank business. Customers can come into the office to meet with loan officers and get other services.
- Hybrid Mortgage Bank: You can operate both an online and brick-and-mortar mortgage bank business. This could involve providing resources online while maintaining a physical office space.
No matter which model you choose, ensure that it aligns with your business goals and the products and services you offer.
Read more about choosing the right business model for your mortgage bank business.
4. Choose a Legal Form for Your Business
By incorporating your mortgage bank business, you will limit your liability. You can incorporate as a Limited Liability Company (LLC), a C Corporation (C-Corp), or an S Corporation (S-Corp). Or you can operate as a sole proprietorship.
The business structure you choose for your mortgage bank business will determine the taxes you pay and which state or federal tax forms you need to file.
Read our article comparing the most common mortgage bank business structures.
5. Write a Mortgage Bank Business Plan
All mortgage bank business owners should develop a business plan.
A business plan is a document that outlines the goals, strategies, and operations of a business. It can be used to secure funding from investors or lenders, as well as to guide the day-to-day operations of the business. The business plan should include information on the company’s products or services, market analysis, financial projections, and management team.
When developing your mortgage bank business plan and strategy, you should think about the following questions your customers might have:
- What types of mortgage bank businesses are there?
- What should I name my mortgage bank business?
- What is the business model for a mortgage bank?
- Which legal form should I choose for my mortgage bank?
- How do I write a mortgage bank business plan?
- How can I attract customers to my mortgage bank business?
- How can I generate revenue for my mortgage bank business?
- How can I scale my mortgage bank business?
- What are some common challenges faced by mortgage bank businesses?
- What are some tips for success in the mortgage bank industry?
- How can I get started in the mortgage bank industry?
- How do I find a mortgage bank business for sale?
- What should I look for when buying a mortgage bank business?
- How much does it cost to start a mortgage bank business?
- How much does it cost to buy a mortgage bank business?
If you can answer these questions, then you are well on your way to starting a successful mortgage bank business!
Read our article about how to write a mortgage bank business plan.
6. Apply for the Necessary Permits and Licenses
You may need to obtain required licenses and permits before launching your mortgage bank business.
For example, you must register your mortgage bank business as a legal entity with the state where you plan to do business. You can simply file an online form through your Secretary of State website.
Registering with the federal government is also essential so you can properly pay taxes for your business. You will also need an Employer Identification Number (EIN), which you can apply for at the IRS website, if you plan to hire employees.
Read our article about obtaining the proper mortgage bank business licenses.
7. Determine Your Budget & Apply for Funding as Needed
In developing your mortgage bank business plan, you will figure out how much funding you need to start and grow your business.
If you have funds to invest in your mortgage bank business, you may consider taking advantage of that. In addition to your personal funds, other forms of potential funding for your mortgage bank business include traditional bank loans, SBA loans, credit cards, angel investors and family and friends.
Read our article about the costs associated with starting a mortgage bank business to help you determine if funding is needed.
8. Get the Technology & Software Needed to Run Your Business Efficiently
When you start your mortgage bank business, it’s essential to have the right technology in place to maximize efficiency. You need a computer with Internet access and accounting software for tracking expenses and revenues.
You may also want to invest in customer relationship management (CRM) software to help you manage your customers’ contact information and loan data. A mortgage point-of-sale (POS) system may also be beneficial if you plan to offer in-person banking services.
9. Market Your Mortgage Bank Business to Potential Customers
Before selling your products and services, you must let the world know you exist. The first step is to create a website so people can learn more about your products and services and how they benefit them.
After you launch your website, start promoting it through social media channels like Facebook, LinkedIn and Twitter. Also consider networking with other people in the mortgage bank industry through social media and blogs so they can help share your business.
You also need to start gathering the materials needed to execute on your promotions strategy, which is your strategy for attracting new customers. Mortgage bank businesses should consider the following promotional strategies:
- Develop a strong online presence. This will include a well-designed website, engaging social media profiles, and informative blog content.
- Create marketing materials highlighting the benefits of working with a mortgage bank. This could include brochures, flyers, fact sheets, and infographics.
- Sponsorship and event participation. You can get your business name out there by sponsoring local events or participating in trade shows and conferences related to the mortgage industry.
- Public relations and media outreach. You can generate buzz for your business by securing press coverage in relevant publications and getting featured on popular podcasts and websites.
- Referral programs. You can incentivize customers to refer your business to their friends and family by offering discounts or rewards.
Read our article about how to market your mortgage bank business for more tips.
10. Get New Customers & Grow Your Business
When you promote your products and services, you’ll start to get interest from potential customers.
Make sure you’re ready to serve these customers. Also, be sure to establish systems to ensure consistency and reduce costs. And be sure to find and train the right people to help you grow your mortgage bank business.
Read our article about how to effectively grow your mortgage bank business to learn more.
Starting a Mortgage Bank Business FAQs
Starting a mortgage bank business can be a great way to become your own boss and control your destiny. Mortgage bankers typically earn high incomes and have the potential to generate a significant amount of wealth over time.
There are several ways to market a mortgage bank business online, including developing a strong website, engaging in social media marketing, creating informative blog content, and participating in relevant industry events. You can also generate buzz for your business by securing press coverage in relevant publications.
Some tips for starting a mortgage bank business include:
- Obtain the proper licenses and permits.
- Understand the mortgage industry.
- Put together a solid marketing and growth strategy.
- Invest in the right technology and software.
- Hire experienced and qualified personnel.
- Create a strong online presence.
- Generate buzz for your business through press and media outreach.
- Participate in relevant industry events.
- Offer referral programs to customers.
A simple checklist to use when starting a mortgage bank business is as follows:
- Choose Your Type of Mortgage Bank Firm: This should be based on what you are best at and how much experience you have. Remember to keep your interests, skills, and experience in mind at all times.
- Name Your Mortgage Bank Business: This should be done with care, as your brand is important for attracting the right customers. A simple, memorable name will go a long way.
- Choose a Legal Form for Your Business: Whether you choose to become a sole proprietorship, partnership, LLC, corporation or another option will depend on your business. Ensure that you are aware of all the implications of each type.
- Determine Your Mortgage Bank Business Model: Determine how your business will make money. Will you sell products, services, or a combination of both?
- Write a Mortgage Bank Business Plan: Your business plan will also help you determine what your start-up costs will be and will provide a roadmap with which you can launch and grow.
- Apply for the Necessary Permits and Licenses: In most locations you will be required to apply for a business license and/or permits before you can begin operations.
- Determine Your Budget & Apply for Funding as Needed: You will need to know how much money you have to spend on all of your business-related expenses before opening any doors. If needed, apply for a small business loan or other funding options.
- Get the Technology & Software Needed to Run Your Business Efficiently: You need to have the right tools in place to succeed. Implement software that will help you manage your time, contacts, and business operations in general.
- Market Your Mortgage Bank Business to Potential Customers: A solid marketing plan will be crucial to your success. It should focus on attracting the right customers so that you can provide them with the products and services they truly need.
- Get Customers & Grow Your Business: Once you have a solid marketing plan, it's time to actively pursue and secure those who could benefit the most from your products and services.
Starting a mortgage bank business can be a great way to enter the financial services industry. Following these tips can increase your chances of success when starting a mortgage bank business.