What is a mortgage broker?
A mortgage broker is a financial entity who serves as a go-between for people (borrowers) looking for mortgages and the organizations that offer mortgages. Mortgage brokers can be both individuals and official institutions.
The job of any mortgage broker is to find the best deal a lender can offer to a borrower. Every mortgage broker can work with many lenders at the same time; the number goes from around ten to more than one hundred lenders. It all depends on the mortgage broker and their business policy. The very fact that a broker has many connections enables them to find more loans than any individual borrower could ever find on their own.
The whole process consists of several stages:
- First, the mortgage broker obtains as much information as needed from the potential borrower
- Secondly, the mortgage broker contacts all the lenders they find suitable and presents them with the borrower’s needs
- Finally, the best match for the borrower’s is determined and the broker then proceeds with the loan
Benefits of engaging a mortgage broker
It is clear that every person could go through the whole process alone, that is- without the help of a mortgage broker. However, it would be very time-consuming, and the process would lack the brokers’ access to good rates and quality deals. Moreover, every broker can recommend the best option for taking a loan (based on their substantial experience and the borrower’s current financial situation). Without the right knowledge, an ordinary person would probably get mixed up in the whole procedure, which involves comparing different rates, checking all the terms and making sure that all the conditions are met down to the last letter. That is why a good broker can prove life-saving to any client (borrower) who lacks the expertise. Plus, if a person cannot even answer the question: “What is predatory lending?” , a good mortgage broker will provide all the necessary information on the subject. Mortgage brokers can offer information on mortgage-related topics, such as: “How to reconcile a bank statement?”, or how to deal with a maximum student loan amount and trail commission.
More than half of those who want to secure a home loan reach out to mortgage brokers for help. It has been predicted that, in the years to come, there will be even more people to use the services of mortgage brokers. This branch of business will continue to flourish as real estate lending rules and regulations become ever more complex. The relationship with the lenders
Before a person decides to enter the mortgage business, he or she should know that maintaining the relationship with the lenders is very important for securing a career. If the idea is to be a good broker and have many clients (borrowers), one must first engage in creating a network of reliable mortgage lenders. Once a mortgage broker establishes an ongoing collaboration with the lenders, the work will be much easier and there will be no unhealthy pressure. The mortgage brokers get paid once the loan closes. If there are more loans under way, the broker will have more income; without the lenders, there is no way to get loans. So, the whole process is a big circle of mutual trust and cooperation, like a bank relying on the help of lender of last resort.
Apart from making the process easier for the borrowers, the mortgage brokers also help the lenders do a better job, because they provide them with a steady flow of new clients. And the good thing is that the lender does not have to spend money for finding the borrowers. The whole broker-lender relationship has become so interconnected that, nowadays, many lenders have special departments dedicated exclusively to mortgage brokers. Getting started
There are two ways of starting a business as a mortgage broker. A person can either open up a firm or choose to work for one. Both options have their pros, but they also carry a lot of risk. Before entering the ring and going for the career as a mortgage broker, every person should know what to expect of the two options.
Working for an established firm is better for those who have no experience in the business, because many companies offer on-the-job training. A new mortgage broker will find it much easier to go through the whole learning process with the help of more experienced colleagues. On the other hand, one might run into a not-so-good company that does not offer as thorough training as expected. Another downside to working for a company is that, sometimes, there is a lot of unhealthy competition among the workforce, and the new person on board might get intimidated by the harsh working conditions.
If a person decides to work alone as an individual mortgage broker, the chances are they will generate more income. Usually, when a person works for a company as a broker, the income is split in half; individual work means that the broker can keep the whole commission. However, an individual mortgage business requires hard work and steady earnings; there can be no procrastination, because the entire burden of work rests on one person’s shoulders.
Therefore, people are strongly advised to think their decisions through and come up with a solution that will best fit their current position and career goals.
The business plan
Once a person decides to enter the mortgage business, the best thing to do is come up with a business plan. It is very important to have a detailed plan, because there is no point in wandering around the market unprepared for all that may come. Every serious mortgage broker should consider their business plan as proposal to approach the lenders. By having a solid plan, a broker will be able to provide a good business image to the lender, and also have the opportunity to mention future plans and the overall success of the business.
The business plan is the safest way of directing a business toward success. For every mortgage broker, the business plan represents the framework within which to operate; without a plan, a broker will be lost and their goals will not be as clear as they should be. Taking care of daily work and minor, tedious tasks will only slow business down; the best way toward reaching long-term goals is by setting a detailed plan and following it faithfully.
The components of a solid mortgage broker business plan
In order to be effective, a business plan has to be unique and follow the goals set by the broker. There are certain sections that are considered essential in a good business plan. They include:
- The introduction
The introduction will offer the lender information about the broker and their business. It is a kind of pitch; in it, the broker can explain why they are reaching out to the lender. A good introduction should include the legal structure of the business (type of ownership), the goals of the business and the potential demand for the business. Also, it should mention the broker’s personal experience, examples of past success, etc. This will serve to separate the business from all other companies similar to it.
The introduction should also have a good mission statement. The mission statement defines the path a company is going to take, and it also serves as a set of guiding principles for future business endeavors. The mission statement (as a part of the business plan introduction) will tell the potential clients what the broker stands for and what he/she wants to achieve in the world of mortgage business.
- Financial information
This section should have the relevant financial information that will show how the business is funded. The lender would want to know whether a person will be able to repay the money that the broker plans to borrow. The financial information should cover a detailed budget for successful managing of the business, project expenses (and operating expenses), outside sources of money (from partners and investors), the broker’s savings and other potential expenses. Income projections are also to be calculated; they should be reasonable, so that the broker can gradually win the lender’s trust. The future brokers are also well advised to list the ways of dealing with current expenses (as well as unexpected costs) and paying the bills.
- Marketing plan
The marketing plan is an inseparable part of the business plan. It serves to showcase your ability to advertise your business and offer your services. It should list all the marketing costs, as well as the type of advertising you plan to employ. The marketing plan should include the demand for mortgage brokers in the given area and the overall quality of the mortgage market in that area. The broker should also mention the current database (number of clients) and the estimated cost for the entire advertising. A good marketing plan also includes any market research that takes place prior to starting the business.
- Operational structure
This section should cover the broker’s day-to-day operations, and offer more details on the actual way in which the business is conducted. It will describe how the broker plans to carry out the work. The broker should also present every stage of reaching the clients and elaborate on the methods applied in the process. Another important thing to mention is the type of quality control that is implemented. Competitive advantage is also something to be mentioned, because it could easily present the company in the best light. Operational structure is a business’ fully body scan.
- The conclusion
The final part of the business plan may prove to be crucial for getting the lender’s support and earning their absolute trust. If the conclusion is weak and full of fluff content, the lender (or the borrower) might have second thoughts. The conclusion should end with an optimistic tone, summarizing the overall quality of the company and reminding the client of it. Just before the end, a strong emphasis should be placed upon the things that help the broker stand out from the competition. Finally, a good call to action would make the whole business plan shine.
Most business plans end with an executive summary. A good executive summary is condensed, but it contains all the necessary information of the broker’s business strategy and ethics. It should also be written in a way that grabs the reader’s attention.
One must remember that having a good business plan does not mean the job is done. The template for a good business plan should be followed, but the broker is free to leave out (or include) anything that he might find inappropriate or unnecessary for doing good business. Every company is unique; therefore, no two mortgage broker business plans are identical. A good business plan has to be flexible, and the broker is well advised to revise and review the plan regularly. If there is a slight turn in the broker’s career path, it should be followed by a logical change in the business plan.
Advice for potential mortgage brokers
Starting a business can be hard at times, and there can be many problems ahead, but a good business plan will always be a trusted ally for any person who decides to work as a mortgage broker.
Once a mortgage broker decides to write a business plan, there should be no room left for doubt. The broker must foresee all potential problems and know how he will react to them; that is why every mortgage broker business plan should work on all levels. Everything inside the company should be measured; there can be no unnecessary expenses or low-quality output. The results have to be excellent; if they are not, then the business plan has to be revised.
How to put a mortgage broker business plan into action?
After the business plan has been successfully put together, the broker should turn to achieving the set goals. The first thing to do is to get in touch with potential investors, and explain to them why the business is good and worth backing up.
Another thing that often gets overlooked is the tone of voice in which the business plan is written. It should be clear, strong and to the point. When getting the business plan together, the broker should have the potential clients in mind. The important questions to ask are:
- Is this business plan really, really effective?
- Would an average person understand the business plan?
- Can certain sections of the plan be improved in any way?
- What makes the business plan excellent?
If all these factors are positive, then the business plan is ready for implementation. Every mortgage broker should know that a business plan is good if it serves long-term goals; a mortgage broker business plan that does not address long-term goals is not good. The broker should also be reasonable and avoid wishful thinking in terms of “overnight success”. Steady, gradual business development is the best way to go.
A strong mortgage broker business plan will enable the broker to detect many points that otherwise might stay under the radar. It will lead to genuinely good cooperation with the clients and improve the organizational structure of the business. Operating any business requires a lot of strength and persistence; that is why a business plan is important for turning a tedious task into an exciting business-making process.
How to find a mortgage broker?
One of the best ways for finding a mortgage broker is to ask friends and colleagues for recommendations or conduct an online search. However, one should bear in mind that every online mortgage broker is required to make their offer in writing. A good idea is to also check whether the broker has an office, because there are scams in this business as well. The National Association of Mortgage Brokers is a recommended source of trusted mortgage brokers; it also offers searching for members in the given area.
Oftentimes, a person needs a mortgage broker. Are you in need of a broker now? Maybe you want a quick check on mortgage rates. You can do that from any province or city in Canada. For example, to find more information on First Calgary Mortgage rates, go to and calculate how much you can borrow.
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