If you’re already a successful mortgage broker in your state and feel you might do even better elsewhere, you might wish to expand to other states — or even nationwide. This sounds exciting, but you need to be well-prepared to take that step.
One of the first and most crucial things you need to look into is the licensing process. Because each state has different licensing requirements, your company needs to research these well in advance.
You especially need to research your mortgage broker bond. So make sure you’re following the mortgage broker bond process once you start, to avoid any possible pitfalls.
Working with only one agency
It might seem logical to get your mortgage broker bond for each state using a different bonding agency, but that’s not an efficient strategy. In fact, it’s better to stick with one agency, and here’s why.
First of all, it’s difficult to research so many agencies, meaning that you risk overlooking something important. (We’ll discuss what to look for in an agency next.)
Secondly, a good surety specialist will be knowledgeable of each state’s requirements and will be able to provide you with the advice tailored to your needs, which will save you time and money.
If any of this sounds foreign to you, make sure you learn what a surety bond is first.
Choosing the right agency
Not sure what to look for when picking a surety agency? Here are some tips.
For starters, it’s important to know that bonding companies rarely work with the public, so you need to work with an agency. However, some agencies work with just one or two bonding companies, while others have an extensive network of partners.
The more partners an agency has, the more offers they’re able to compare when they send out your application.
One thing you should always ask an agent before agreeing to work with them is whether they do a soft credit pull or a hard credit pull. A hard credit pull is one that’s usually required for things such as car loans and mortgages though some surety bond agencies also use it.
It’s best to avoid these agencies, as hard credit pulls can negatively affect your credit score.
You should also look for an agency that underwrites the bond in-house. If not, they will likely broker your application to other companies, which not only drives costs up but can extend the process of getting bonded and licensed.
Decreasing your licensing costs
Every state sets its own application fees, and there’s rarely anything you can do to reduce costs there. You can, however, do something about the cost of your mortgage broker bond, so it’s important to understand how pricing works.
When you’re working with larger bond amounts, it’s especially important to maintain sound financial health, both personally and in your business.
You might have heard that your personal credit score is the main determining factor for the premium you pay on a mortgage broker bond.
Naturally, anything you can do to increase your credit score will end up favorably affecting your cost. It isn’t always possible, so if it’s not, there are other tricks you can use to lower your price.
If you and your company are in strong financial health, you need to demonstrate that. If you have any partners, the same goes for them. Sureties will perceive you as a lower-risk applicant if your financial statements show good liquidity, thus lowering your premium.
Your experience in the industry can be equally important. If you’re going through a rough patch financially, showing a resume with substantial industry experience can help negate some of the impact your current finances will have on what your mortgage broker bond will cost you.
You are now well-aware of some of the common pitfalls mortgage brokers experience when expanding nationwide.
Did you experience any of these or others while growing your business? Share them with your fellow mortgage brokers in the comments section below.
Lachezar Stamatov has rich experience in blogging about all surety bond related topics with a focus on small business and the surety bonding industry. He is a frequent contributor for JW Surety Bonds.