A mortgage company is a corporation that was established for the purpose of giving people who want to buy their own homes a platform in the form of a long-term loan.
As long as you pass the screening and evaluation process, you can fund any property of your choice with the loan you obtain from the bank through a mortgage business. Before giving a loan, the procedure must be followed, and the recipient of the loan must be creditworthy.
The types of home mortgages in Texas are conventional loans, which are protected by either Freddie Mac or Fannie Mae. Conventional loans offer better conditions with rates depending on credit score and cheap mortgage insurance costs with down payments of as little as 5 percent.
Steps on How to Start a Mortgage Business in Texas
Table of Content
Conduct Market Research
Texas is among the most populous states in the United States, with numerous opportunities for businesses like mortgages. So if you are new to the mortgage industry, your first step ought to be diligence.
Take your time to find out the most recognized city when it comes to real estate and housing because, in such cities, the mortgage business thrives. You may also want to check the regulations and competitions you are likely going to face if you start your mortgage business in Texas or a specific city.
a. Who is the Target Market for Mortgage Companies?
New homebuyers and refinancers are two potential clientele that most mortgage businesses are looking to attract because they have more earning potential and more disposable income. The ideal customer for mortgage firms is typically older with an established investment portfolio with a seven-figure balance, though this isn’t a hard-and-fast rule.
b. Is a Mortgage Company a Profitable Business in Texas?
Yes. The mortgage business is a profitable business. The margin mortgage lenders receive when they sell the loan to the investor and other additional fees that may be imposed are the two methods by which they can turn a profit.
c. Are There Existing Niches in the Industry?
Yes, there are existing niche ideas when it comes to the mortgage line of business and they are;
- Mortgage brokerage for homes
- Arranging loans for businesses and industries
- Lending for a home equity
- Facilitating equipment financing transactions
- Lending for vehicles
- Online residential mortgage brokerage
- Online mortgage refinancing brokers
- Online mortgage loan brokerage
- Providing a mortgage marketplace online.
d. Who are the Major Competitors in Texas?
- Supreme Mortgage Company Dallas TX
- Steve Head Team/Texas Premier Mortgage
- DFW Texas Mortgage
- NXT Mortgage Company
- The Texas Loan Company
- Texas Trust Home Loans
- Integrity Mortgage Corporation of Texas
- Lone Star Financing
- The Texas Mortgage Pros
- Texas United Mortgage
- Team Texas Mortgage
- S. Mortgage of Texas
- Guild Mortgage Company
- TexasBank Mortgage
- Guild Mortgage Company
- Mortgage Lender Mesquite TX
- Mortgage Lender Bedford Texas.
e. Are There County or State Regulations or Zoning Laws for Mortgage Businesses in Texas?
There are no zoning laws or county or state regulations controlling mortgage companies, but participants in this industry are expected to comply with any rules governing organizations with a similar mission in the state where their business is located.
Note that some laws are enforced by the CFPB, including the Real Estate Settlement Procedures Act and the Truth in Lending Act. These rules mandate that lenders inform homebuyers of information both before and during the mortgage’s term.
f. Is There a Franchise for Mortgage Business?
Yes, there are franchise opportunities for the mortgage business and they are;
- Motto Mortgage Franchising, LLC
- Weichert Real Estate Affiliates, Inc.
- American Lenders Service Company
- Blue Collar Financial Group
- Avalar Real Estate & Mortgage Network
- Nectar Mortgages
- Huffman Builders
- Diamond Financial
- Global Financial
- The Mortgage Bureau.
g. What Do You Need to Start a Mortgage Company?
- A feasibility report
- Business and marketing plans
- Business licenses and permits
- Office space
- Computers – laptops, and Servers
- EIN (Employer Identification Number)/Federal Tax ID Number
- A corporate bank account
- Software apps
- Startup capital.
Choose a Memorable Business Name
When looking to start a business, before you can begin to file the necessary documents with the constituted authorities or start your website, it is necessary that you come up with a name that you will be recognized with. It is essential that the name you come up with can easily be pronounced, is unique and easily memorable.
Some of the catchy business name ideas suitable for a mortgage business are;
Creative Mortgage Business Name ideas
- Crispy Ribbon© Mortgage Lenders Company, Inc.
- Fidelity Trust® Mortgage Lenders Services, LLC
- House Top© Mortgage Company, Inc.
- Loan Solutions® Mortgage Company, Inc.
- Credit Line™ Mortgage Company, Inc.
- Boom Lenders™ Mortgage Company, LLC.
- Happy April© Mortgage Company, LLC
- Get It® Mortgage Lenders Company, Inc.
- Benjamin Glazers© Mortgage Company, Inc.
- Jared Maquis© Mortgage Company, Inc.
- John Hilary® Mortgage Company, Inc.
- Er Jordan® Mortgage Company, Inc.
- Donah Perez® Mortgage Company, Inc.
- George Oniel® Mortgage Company, Inc.
- O’Brien Rhodes® Mortgage Company, Inc.
- Julius O’Connor© Mortgage Company, Inc.
- Richards Brothers™ Mortgage Company, LLC
- Remi Martins® Mortgage Company, Inc.
- Josiah Kimberley® Mortgage Company, Inc.
- Vicar Joseph™ Mortgage Company, Inc.
Register Your Business
a. What Type of Business Structure is Best for a Mortgage Company?
Establishing a limited liability company (LLC) or corporation could aid safeguard your private resources if your mortgage business is unprofitable. An LLC is mostly an outstanding option for business owners operating by themselves or even with one or multiple associates.
Aside from safeguarding your personal possessions, LLCs give you a lot of influence over the firm. However, they limit your capacity to raise funds. Corporations as well safeguard your personal assets while allowing you to secure funding to a limitless level, but they offer you little supervision over your private company.
b. Steps to Form an LLC
- Choose a name for your LLC
- File articles of organization
- Choose a registered agent
- Decide on member vs. manager management
- Create an LLC operating agreement
- Comply with other tax and regulatory requirements
- File annual reports.
c. What Type of License is Needed to Open a Mortgage Company in Texas?
- General Business License
- Money Lending License
- Zonal Permits (Applicable in some cities)
- Signage Permit.
d. What Type of Certification is Needed to Open a Mortgage Company in Texas?
You don’t need any certification to open a mortgage company in the United States.
e. What Documents are Needed to Open a Mortgage Company in Texas?
These are some legal documents that are required if you want to run a mortgage company in Texas;
- Business and Liability Insurance
- Federal Tax Payer’s ID
- State Permit and Building Approval
- Certificate of Incorporation
- Business License and Money Lending License
- Business Plan
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Contract Document
- Company Bylaws
- Memorandum of Understanding (MoU).
f. Do You Need a Trademark, Copyright, or Patent?
No. Applying for intellectual property protection in this type of business will make no meaning since there are no specific documents that are required to be protected.
Nevertheless, if you believe that it is necessary to safeguard your company name, logo, slogan, or any other official documents, you could speak with an experienced intellectual property lawyer to aid you to apply for your company’s trademarks.
Cost Analysis and Budgeting
a. How Much Does It Cost to Start a Mortgage Company in Texas?
When starting a mortgage company, it could cost from $100,000 to over $500,000 depending on how much you intend to loan and the office space leased.
b. What are the Costs Involved in Starting a Mortgage Company?
- Business registration fee – $750.
- Expenses for obtaining licenses and permits – $4,300
- Marketing promotion expenses – $3,580
- Insurance – $2,400
- Rent and furnishing – $125,000
- Operational capital – $5.5 million
- Operational cost for the first 3 months (salaries of employees, payments of bills and software renewal fees et al) – $25,000
- Miscellaneous: $2,000.
c. What Factors Determine the Costs of Opening a Mortgage Company?
- The size of the mortgage company
- The choice of location
- The required licenses and permits
- The type of facility
- The additional services offerings
- The cost of hiring and paying a business consultant and attorney
- The cost of branding, promotion, and marketing, the company
- The cost of furnishing and equipping the company facility
- The cost of the insurance policy covers
- The cost of registering the business
- Cost of recruiting and training the staff
- The cost of the purchase and customizing of uniforms, shoes, and caps for the employees
- The cost of the grand opening of the mortgage company.
d. Do You Need to Build a Facility?
Because it is a business that can be operated from an office that is leased, rented, or from home, you do not need to construct a building for a mortgage company. If all of your activities are done online, you might run your business from home, and only rent a shared office space for fronting.
e. What are the Ongoing Expenses of a Mortgage Company?
- Utility bills (internet subscriptions, phone bills, signage and software renewal fees et al)
- Transport and logistics
- Salaries of employees.
f. What is the Average Salary of your Staff?
- Chief Executive Officer – $75,000
- Human Resources and Admin Manager – $47,000
- Accountant – $46,000
- Mortgage Lending Officer – $46,500
- Marketing Executive – $35,000
- Client Service Executive (Help Desk Office) -$33,000 Per year.
g. How Do You Get Funding to Start a Mortgage Company?
Obtaining funding will be your next move and there are numerous methods for obtaining capital which include:
- Loans from banks
- SBA-backed loans
- Government assistance
- Family and friends
- Personal saving.
Aside from friends and family, bank and SBA loans are the best choices for financing a mortgage business.
Write a Business Plan
a. Executive Summary
Remi Martins™ Mortgage Lending Company, Inc. is a registered business that will be based in Dallas, Texas, United States of America, but could operate all over the United States via our online portal and app.
The company has secured a well–positioned office facility in a conducive business district in Dallas, and that is where we intend to coordinate all our business activities. We are a company that is set to compete in the competitive mortgage industry, not only in the United States market but also in the global market.
b. Products and Service
Remi Martins™ Mortgage Lending Company, Inc. specializes in making loans secured by particular securities’ mortgages. They include various activities such as loan origination, mortgage sale, and loan/mortgage servicing and reduce the variety of loan products at a low rate or with high funding arrangements.
c. Mission Statement
Our mission is to provide professional and reliable mortgage services that will assist businesses, individuals, and corporate executives in handling their housing and real estate needs. We want to build a mortgage company that can compete with other leading brands in the industry.
Our vision is to establish a standard mortgage company whose services and brand will not only be accepted in Dallas, Texas but throughout the United States of America.
d. Goals and Objectives
Our goals and objectives are to carry out our activities by securitizing mortgages and other assets and bringing liquidity to the housing market. We will participate in the capital market to help stabilize the housing financing system. Create a professional, successful organization with a skilled workforce by using best practices.
e. Organizational Structure
- Chief Executive Officer
- Human Resources and Admin Manager
- Mortgage Lending Officer
- Marketing Executive
- Client Service Executive (Help Desk Office).
a. SWOT Analysis
- Excellent operational history
- Strong relationships with key stakeholders
- Experience and trained professionals
- Excellent customer testimonials (trust)
- Access to finance
- Reliable and efficient business processes.
- The owner is new to large-scale marketing
- Lack of economies of scale.
- Increase in the demand for mortgages and the services offered by mortgage companies.
- Loans diminish profitability until they are paid off
- First-year will be financially tight while we gain customers and pay off loans
- Competition in the area could increase
- Management of employees requires time, money, and efforts
- The regulatory department could change its status and decide to enforce strict regulations that can strangulate new business.
b. How Do Mortgage Companies Make Money?
Mortgage companies make money from investing, and interest is generated from loans issued.
c. Payment Options
- Payment via bank transfer
- Payment with cash
- Payment via credit cards/Point of Sale Machines (POS)
- Payment via online bank transfer
- Payment via check
- Payment via mobile money transfer
- Payment via bank draft.
d. Sales and Advertising Strategies
- Introduce your mortgage company and the services you offer by sending introductory letters alongside your brochure to corporate organizations, and other key stakeholders throughout the city where your mortgage company is located.
- Advertise on the internet, blogs, and forums, and also on social media like Twitter, Facebook, and LinkedIn to get your message across to people.
- Create a website for your business, so as to give your business an online presence
- Directly market your services
- Advertise your business in community-based newspapers, local tv and radio stations
- List your business on yellow pages ads (local directories)
- Encourage the use of word-of-mouth marketing (referrals).
a. How Much Should You Charge for your Product/Service?
Between 2 percent and 5 percent of the purchase price should be budgeted for closing fees by buyers. Their share of the costs usually consists of one or two origination points (lender fees), which amount to 1 percent to 2 percent of the loan, and often consist of loan origination fees between $750 and $1,200.
b. How Much Profit Do Mortgage Company Owners Make a Year in Texas?
The owner of a mortgage company isn’t really required to make a certain amount of money. however, they should anticipate a yearly salary beyond $112,222 on average.
c. What Factors Determine the Amount of Profit to Be Made?
- The capacity of the mortgage company
- The location mortgage company is covering
- The management style of the mortgage company
- The business approach of the mortgage company
- The advertising and marketing strategies adopted by the mortgage company facility – business
- The number of years the mortgage company facility is in business.
d. What is the Profit Margin of a Mortgage Company Product/Service?
A mortgage broker usually receives compensation of 0.15 percent of the loan amount. On a loan debt of $400,000, this translates to roughly $600 a year.
e. What is the Sales Forecast?
- First Fiscal Year: $1.5 million
- Second Fiscal Year: $3.3 million
- Third Fiscal Year: $5 million
Set Up your Shop/Office
a. How Do You Choose a Perfect Location for a Mortgage Company in Texas?
- The demography of the location as it relates to the real estate market, and people who can afford a mortgage
- The demand for the services of mortgage companies in the location
- The purchasing power of businesses and the residents of the location
- Accessibility of the location
- The number of mortgage companies and lending services in the location
- The local laws and regulations in the community/state
- Traffic, parking, and security et al.
b. What City is Best to Open a Mortgage Company in Texas?
- San Marcos, Texas
- Arlington, Texas
- Fort Worth, Texas
- McKinney, Texas
- Houston, Texas
- Round Rock, Texas
- San Antonio, Texas
- Dallas, Texas
- Del Valle, Texas
- Austin, Texas.
c. What Equipment is Needed to Operate a Mortgage Company?
- Software applications
- Storage and internet facility
- Telephone, and fax machine
- Office furniture (chairs, tables, and shelves).
You should hire a capable Chief Executive Officer (CEO), Human Resources and Admin Manager, Sales and Marketing Executive, Accountant, Mortgage Lending Officer, and Client Service Executive when it comes to staffing a mortgage company.
Launch the Business Proper
No mortgage company opens for business without first organizing an opening party to officially launch it. You can do a soft opening party if you are operating on a low budget or you can go for a grand opening party for all and sundry in the location where your mortgage company will be located. With the proper launching of the mortgage company, you will officially inform people in your city that your company is open for business.
a. What Makes a Mortgage Company Successful?
- Attention to details
- Willingness to take chances
- Customer-centric business approach
- Good marketing
- Strong vision
- Passionate leadership
- Empowered employees.
b. What Happens During a Typical Day at a Mortgage Company?
- The office is open for the day’s work
- The activities to be carried out for the day will be reviewed
- Employees go straight to their job description (savings are collected and deposited, and loans are disbursed)
- Marketers go all out to market the service offerings of the company
- Reports are written and submitted to superior officers
- The business is closed for the day.
c. What Skills and Experience Do You Need to Build a Mortgage Company?
- Excellent mortgage administrative skills
- Excellent computer skills
- Ability to pay attention to details
- Good managerial and human development skills
- Good accounting and bookkeeping skills
- Visionary leadership
- Team-building and interpersonal skills
- Excellent communication and negotiation skills
- Organizational skills
- Good problem-solving ability
- Good supervisory skills
- Experience in managing mortgage-related services business
- Experience in the financial services industry
- Experience in business administration
- Experience in handling relevant mortgage software.