Mortgage Broker Business Plan Template
If you want to start a Mortgage Broker business or expand your current Mortgage Broker business, you need a business plan.
The following Mortgage Broker business plan template gives you the key elements to include in a winning loan officer business plan.
Mortgage Broker Business Plan Example
I. Executive Summary
Business Overview
[Company Name], located IN [insert location here] is a new mortgage brokerage specializing in residential mortgages. The company will operate in a professional setting, conveniently located next to [notable bank] in the center of the shopping district. [Company Name] is headed by [Founder’s Name], an MBA Graduate from XYZ University with 20 years of experience working as in the finance industry.
Services
[Company Name] will focus on superior service for its clients. [Company’s Name] services include finding loan options, applying for loans on behalf of customers, and completing closing paperwork. It has a full-time assistant who, among other things, will manage the company website, coordinate scheduling, and answering basic client questions.
The founder, [Founder’s Name], will also focus on meeting his clientele’s needs. In addition to keeping in touch with past clients after they have closed on the mortgage, [Founder’s Name] will hold webinars for the community and potential clients on the mortgage lending process and securing the best mortgage for each budget and property type.
Customer Focus
[Company Name] will primarily serve homebuyers and commercial real estate clients interested in properties within a 10-mile radius of our location. The demographics of residents in this area are as follows:
- 27,827 residents
- Average income of $74,700
- 58.9% married
- 49.6% in Mgt./Professional occupations
- Median age: 38 years
These residents include 20% renters and 80% homeowners. Furthermore, [Company Name] will seek contacts with real estate agents in order to develop long-term relationships.
Management Team
[Company Name]’s most valuable asset is the expertise and experience of its founder, [Founder’s Name]. [First name] has been a licensed mortgage broker for the past 20 years. He has spent much of his career working at LendingTree. There he specialized in commercial loans for 5 years before moving to specialize in home mortgages for the next 10 years.
[Company Name] will also employ an experienced assistant to help with various administrative duties around the office. [Assistant’s name] has experience working with C-level executives and has spent significant time as an administrator.
Success Factors
[Company Name] is uniquely qualified to succeed due to the following reasons:
- [Company Name] will fill a specific market niche in the growing community we are entering. In addition, we have surveyed local realtors and homebuyers and received extremely positive feedback saying that they would consider making use of our services when launched.
- Our location is in an economically vibrant area where new home sales are on the rise and turnover in homes and rentals occurs often due to the upward mobility of residents.
- The management team has a track record of success in the mortgage brokerage business.
- The local area is currently under served and has few independent mortgage brokers offering high customer service to homebuyers.
Financial Highlights
[Company Name] is seeking a total funding of $100,000 of debt capital to open its office. The capital will be used for funding capital expenditures and location build-out, hiring initial employees, marketing expenses and working capital.
Specifically, these funds will be used as follows:
- Office design/build: $45,000
- Applicable licenses: $5,000
- Working capital: $50,000 to pay for marketing, salaries, and lease costs until [Company Name] reaches break-even
Top line projections over the next five years are as follows:
| Financial Summary | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Revenue | $965,742 | $1,878,611 | $2,718,300 | $3,477,900 | $4,285,228 |
| Total Expenses | $390,241 | $630,018 | $931,935 | $1,171,906 | $1,429,992 |
| EBITDA | $575,501 | $1,248,593 | $1,786,365 | $2,305,994 | $2,855,237 |
| Depreciation | $8,720 | $8,720 | $8,720 | $8,720 | $8,720 |
| EBIT | $566,781 | $1,239,873 | $1,777,645 | $2,297,274 | $2,846,517 |
| Interest | $5,077 | $4,442 | $3,807 | $3,173 | $2,538 |
| PreTax Income | $561,705 | $1,235,431 | $1,773,838 | $2,294,101 | $2,843,978 |
| Income Tax Expense | $196,597 | $432,401 | $620,843 | $802,935 | $995,392 |
| Net Income | $365,108 | $803,030 | $1,152,995 | $1,491,166 | $1,848,586 |
| Net Profit Margin | 38% | 43% | 42% | 43% | 43% |
II. Company Overview
Who is [Company Name]?
[Company Name], located at [insert location here] is a new mortgage brokerage specializing in residential mortgages. The company will operate in a professional setting, conveniently located next to [notable bank] in the center of the shopping district. [Company Name] is headed by [Founder’s Name], an MBA Graduate from XYZ University with 20 years of experience working as a mortgage broker.
While [Founder’s Name] has been in the mortgage brokerage business for some time, it was in [month, year] that he decided to launch [Company Name]. Specifically, during this time, [Founder] met with a former friend and fellow independent mortgage broker in Fort Lauderdale, FL who has had tremendous success. After discussing the business at length, [Founder’s Name] clearly understood that a similar business would enjoy significant success in his hometown.
Specifically, the customer demographics and competitive situations in the Fort Lauderdale location and in his hometown were so similar that he knew the business would work. After surveying the local population, [Founder’s name] went ahead and founded [Company Name].
[Company Name]’s History
Upon returning from Fort Lauderdale, surveying the local customer base, and finding a potential office, [Founder’s Name] incorporated [Company Name] as an S-Corporation on [date of incorporation].
The business is currently being run out of [Founder’s Name] home office, but once the lease on [Company Name]’s office location is finalized, all operations will be run from there.
Since incorporation, the Company has achieved the following milestones:
- Found office space and signed Letter of Intent to lease it
- Developed the company’s name, logo and website located at [website]
- Hired an interior designer for the decor and furniture layout
- Determined equipment and fixture requirements
- Began recruiting key employees
[Company Name]’s Products & Services
[Founder’s Name] will offer the following services:
- Residential mortgages: [Company Name] specializes in residential mortgages for single and multifamily residences.
- Commercial and industrial mortgages and broker/dealer services: [Company Name] will work with commercial and industrial clients to obtain loan products for new facilities, and equipment financing.
- Home equity loans: [Company Name] will match clients seeking home equity lines of credit (HELOC) and mortgage refinancing with lenders offering these products.
- Borrower Information Sessions: Seminars at the mortgage brokerage or at larger venues when appropriate will be offered to present topics such as how to obtain the best mortgage rates, what type of mortgage is best for each situation, etc
As [Founder’s Name] understands, the key to a successful mortgage brokerage is building referrals and a long-term reputation as a trustworthy agent in the community. [Founder’s Name] will continue to reach out to past clients in future years to answer questions and to continue to develop a relationship.
III. Industry Analysis
Last year, U.S. mortgage brokerages brought in revenues of $11.5 billion and employed 47,000 people. There were just over 12,000 businesses in this market. The Mortgage Brokers industry is highly fragmented, with the top two companies accounting for just over 11% of industry revenue. Key players in the American mortgage broker industry include LendingTree, and HomeServices of America.
Major revenue streams of the industry include: The bulk of brokerage fees and commissions come from residential mortgages, and the remaining revenue comes from brokerage fees and commissions on nonresidential mortgages and loans, and mortgage broker consulting fees.
A recent study commissioned by the Mortgage Bankers Association found that:
Except for very large firms, modest economies of scale persist throughout almost the entire range of output… while average firm size is increasing, many mortgage broker firms are too small to take full advantage of the cost reductions possible with a larger scale of operation. Equally important, large firms do not command a competitive advantage over smaller firms, as far as unit costs are concerned.This bodes well for a small firm starting out with experienced leadership.
IV. Customer Analysis
Demographic Profile of Target Market
[Company Name] will primarily serve the residents of [company location].
The area we serve has a significant population of young professionals, who have yet to purchase their first home.
The precise demographics of the town in which our business is based are as follows:
| Wilmette | Winnetka | |
|---|---|---|
| Total Population | 26,097 | 10,725 |
| Square Miles | 6.89 | 3.96 |
| Population Density | 3,789.20 | 2,710.80 |
| Population Male | 48.04% | 48.84% |
| Population Female | 51.96% | 51.16% |
| Target Population by Age Group | ||
| Age 18-24 | 3.68% | 3.52% |
| Age 25-34 | 5.22% | 4.50% |
| Age 35-44 | 13.80% | 13.91% |
| Age 45-54 | 18.09% | 18.22% |
| Target Population by Income | ||
| Income $50,000 to $74,999 | 11.16% | 6.00% |
| Income $75,000 to $99,999 | 10.91% | 4.41% |
| Income $100,000 to $124,999 | 9.07% | 6.40% |
| Income $125,000 to $149,999 | 9.95% | 8.02% |
| Income $150,000 to $199,999 | 12.20% | 11.11% |
| Income $200,000 and Over | 32.48% | 54.99% |
Customer Segmentation
The Company will primarily target the following four customer segments:
- Existing homeowners: A large contingent of homeowners in this community are looking to trade up to larger or more expensive homes. Still other homeowners are aging, and are in the market to downsize to more manageable properties.
- First Time Home Buyers: First time home buyers are mostly made up of young professionals who have always been renters. Therefore, this group tends to value a mortgage broker who is knowledgeable about the area’s real estate market in general, and shows the intention of truly negotiating well on their behalf.
- Businesses: Businesses are typically in the market for commercial and industrial loans that are far larger than home loans. While there are significantly fewer commercial customers, these businesses turn to brokers who have relationships with multiple commercial lenders, and can offer the best interest rate options.
V.Competitive Analysis
Direct & Indirect Competitors
The following residential mortgage brokerages are located within a 20 mile radius of [Company Name], thus providing either direct or indirect competition for customers:
The Loan Store
Established in 2010, The Loan Store originates, finances, and sells mortgage and nonmortgage lending products in the United States. It offers a range of consumer credit products, such as home loan products; home equity loans; and unsecured personal loans, as well as home and personal loan servicing. The company claims to be one of the largest private, independent retail mortgage lender in the U.S. Its current business channels include direct lending, affinity, branch retail and servicing.
However, agents working with The Loan Store experience high turnover, resulting in little concern for maintaining ongoing relationships with clients. Also, the agents themselves are mixed in quality, ranging from part-time brokers with little experience or sales records to full-time brokers with long-term experience. There is no systematic company method for passing on knowledge from experienced to inexperienced brokers as all are competing with each other, to a certain extent, for commissions.
Direct Loan Connection
Founded in 2006, Direct Loan Connection (DLC) employs licensed mortgage professionals who have access to multiple lending institutions, including banks, credit unions and trust companies. This access enables the company to offer a vast array of available mortgage products – ranging from first-time homebuyer programs to financing for the self-employed to financing for those with credit blemishes.
In addition to help for homebuyers and homeowners, Dominion offers commercial mortgages.
Unlike [Company Name], DLC operates with a smaller number of transactions each year due to the higher commissions they earn on each. They refuse to negotiate on their broker’s fees, and sometimes lose potential clients because of this. However, for the premium end of the market, they are the local leader.
Supreme Mortgage
Supreme Mortgage specializes in mortgage brokering, and is committed to helping homebuyers and homeowners the best mortgage with the lowest mortgage interest rate. The brokerage works with more than 40 lenders who compete to provide mortgages, and who pay Supreme Mortgage’s fee so that clients receive the service free of charge.
Some reviews of Supreme Mortgage point out the low quality service offered by brokers, who have little training in customer service. Furthermore, Supreme Mortgage does not attempt to maintain long-term relationships with customers who will eventually purchase another home.
Competitive Advantage
[Company Name] enjoys several advantages over its competitors. These advantages include:
- Location: [Company Name]’s location is near the center of town, in the shopping district of the city. It is visible from the street where many residents shop for both day-to-day and luxury items.
- Client-oriented service: [Company Name] will have a full-time assistant to keep in contact with clients and answer their everyday questions. [Founder’s Name] realizes the importance of accessibility to his clients, and will further keep in touch with his clients through monthly seminars on topics of interest.
- Management: [Founder’s Name] has been extremely successful working in the mortgage brokerage sector and will be able to use his previous experience to grant his clients detailed insight into the world of home loans. His unique qualifications will serve customers in much more sophisticated a manner than many of [Company Name’s] competitors.
- Relationships: Having lived in the community for 25 years, [Founder’s Name] knows many of the local leaders, newspapers and other influencers.
VI. Marketing Plan
[Company name] will use several strategies to promote its name and develop its brand. By using an integrated marketing strategy, [Company Name] will win clients and develop consistent revenue streams.
The [Company name] Brand
The [Company name] brand will focus on the Company’s unique value proposition:
- Client-focused residential mortgage brokerage services, where the Company’s interests are aligned with the customer
- Service built on long-term relationships and personal attention
- Big-firm expertise in a small-firm environment
Promotions Strategy
Targeted Cold Calls
[Company name] will initially invest significant time and energy into contacting potential clients via telephone. In order to improve the effectiveness of this phase of the marketing strategy, a highly-focused call list will be used, targeting households throughout the area. As this is a very time-consuming process, it will primarily be used during the startup phase to build an initial client base.
Referrals
[Company name] understands that the best promotion comes from satisfied customers. The Company will work to partner with local realtors by providing economic or financial incentives for every new client produced. This strategy will increase in effectiveness after the business has already been established.
Additionally, [company name] will aggressively network with useful sources such as home contractors, property development companies, and businesses which import employees from other areas of the country and nations. This network will generate qualified referral leads.
Internet
[Company name] will invest resources in two forms of geographically-focused internet promotion—organic search engine optimization and pay-per-click advertising. The Company will develop its website in such a manner as to direct as much traffic from search engines as possible. Additionally, it will use highly-focused, specific keywords to draw traffic to its website, where potential clients will find a content-rich site that presents [Company name] as the trustworthy, well-qualified mortgage brokerage that it is.
Publications
[Company name] will advertise its services in key local publications, including newspapers, area magazines, and its own newsletter. Additionally, the Company will print brochures and place them in specific locations frequented by target individuals, such as small business development centers and real estate offices.
Seminars
By offering seminars on topics of interest in the office or other locations, [Founder’s Name] will encourage residents in the community to become comfortable with the expertise and character of [Company Name]. These seminars will generally be offered free of charge as general promotion and for direct networking.
Pricing Strategy
[Company Name]’s pricing will rely on the standard industry rates in order to be perceived as neither a luxury nor a discount broker. The standard rate for brokering a mortgage is 1-2% of the loan amount. By seeking quality clients and maintaining long-term relationships with them, [Company Name] will fend off pressure to discount their rates, even in down markets.
VII. Operations
[Company Name] will carry out its day-to-day operations primarily on an appointment basis. Prospective homebuyers will make appointments to begin the preapproval process and to discuss their needs. These will primarily occur via telephone or email, although some discussions may be held in the office’s meeting room.
[Founder’s Name] will work on an as-needed basis. This includes weekends, which are a prime time for real estate transactions, and will generally take days off on weekdays. The company will also employ an administrative assistant who will also support marketing and client relationship development efforts and will be present on weekdays on a regular 9 AM – 5 PM schedule.
Milestones
Company name]’s long term goal is to become the number-one name in residential mortgage brokering in terms of the right balance of mortgage options, rates, and customer service quality. We seek to do this by ensuring customer satisfaction and developing a loyal and trusting clientele.
The following are a series of steps that will lead to this long-term success. [Company Name] expects to achieve the following milestones in the following [xyz] months:
| Date | Milestone |
|---|---|
| [Date 1] | Finalize lease agreement |
| [Date 2] | Design and build out [Company Name] office |
| [Date 3] | Hire and train initial staff |
| [Date 4] | Kickoff of promotional campaign |
| [Date 5] | Reach break-even |
| [Date 6] | Reach XXX ongoing clients |
VIII. Management Team
[Company Name]’s most valuable asset is the expertise and experience of its founder, [Founder’s Name]. [First name] has been a licensed mortgage broker for the past 20 years. He has spent much of his career working at LendingTree. There he specialized in commercial loans for 5 years before moving to specialize in home mortgages for the next 10 years. [Founder’s Name] maintains his mortgage broker license in the state of [state] as well as the states of [other states].
[Company Name] will also employ an experienced assistant to help with various administrative duties around the office. [Assistant’s name] has experience working with C-level executives and has spent significant time as an administrator.
Hiring Plan
[Founder’s Name] will serve as the company CEO and president. In order to launch the business we do not need additional personnel beyond the assistant who has already been recruited, but will hire the following in the future:
- Mortgage Brokers: Hire one additional broker every other year starting with year 2, assuming demand exists in the market
- Administrative Assistant: Hire a second assistant in year 3
IX. Financial Plan
Revenue and Cost Drivers
[Company Name]’s revenues will come primarily from the commissions earned from residential mortgage sales. 80% of the deals each quarter are expected to be residential mortgages, and 20% business loans.
As with most services, labor expenses will be key cost drivers. [Founder’s Name] and future brokers will earn a competitive base salary. Furthermore, the costs of transactions are projected to be roughly 40% of regular commission revenue and cover advertising, and other direct costs for each deal.
Moreover, ongoing marketing expenditures are also notable cost drivers for [Company Name].
Capital Requirements and Use of Funds
[Company Name] is seeking a total funding of $100,000 of debt capital to open its office. The capital will be used for funding capital expenditures and location build-out, hiring initial employees, marketing expenses and working capital.
Specifically, these funds will be used as follows:
- Office design/build: $45,000
- Applicable licenses: $5,000
- Working capital: $50,000 to pay for marketing, salaries, and lease costs until [Company Name] reaches break-even
Key Assumptions & Forecasts
The following table reflects the key revenue and cost assumptions made in the financial model.
| Clients per Quarter | Average |
|---|---|
| FY 1 | 15 |
| FY 2 | 21 |
| FY 3 | 30 |
| FY 4 | 36 |
| FY 5 | 45 |
| Annual Lease/rent ( per location) | $50,000 |
5 Year Annual Income Statement
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||
|---|---|---|---|---|---|---|
| Revenues | ||||||
| Product/Service A | $151,200 | $333,396 | $367,569 | $405,245 | $446,783 | |
| Product/Service B | $100,800 | $222,264 | $245,046 | $270,163 | $297,855 | |
| Total Revenues | $252,000 | $555,660 | $612,615 | $675,408 | $744,638 | |
| Expenses & Costs | ||||||
| Cost of goods sold | $57,960 | $122,245 | $122,523 | $128,328 | $134,035 | |
| Lease | $60,000 | $61,500 | $63,038 | $64,613 | $66,229 | |
| Marketing | $20,000 | $25,000 | $25,000 | $25,000 | $25,000 | |
| Salaries | $133,890 | $204,030 | $224,943 | $236,190 | $248,000 | |
| Other Expenses | $3,500 | $4,000 | $4,500 | $5,000 | $5,500 | |
| Total Expenses & Costs | $271,850 | $412,775 | $435,504 | $454,131 | $473,263 | |
| EBITDA | ($19,850) | $142,885 | $177,112 | $221,277 | $271,374 | |
| Depreciation | $36,960 | $36,960 | $36,960 | $36,960 | $36,960 | |
| EBIT | ($56,810) | $105,925 | $140,152 | $184,317 | $234,414 | |
| Interest | $23,621 | $20,668 | $17,716 | $14,763 | $11,810 | |
| PRETAX INCOME | ($80,431) | $85,257 | $122,436 | $169,554 | $222,604 | |
| Net Operating Loss | ($80,431) | ($80,431) | $0 | $0 | $0 | |
| Income Tax Expense | $0 | $1,689 | $42,853 | $59,344 | $77,911 | |
| NET INCOME | ($80,431) | $83,568 | $79,583 | $110,210 | $144,693 | |
| Net Profit Margin (%) | - | 15.00% | 13.00% | 16.30% | 19.40% |
5 Year Annual Balance Sheet
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||
|---|---|---|---|---|---|---|
| ASSETS | ||||||
| Cash | $16,710 | $90,188 | $158,957 | $258,570 | $392,389 | |
| Accounts receivable | $0 | $0 | $0 | $0 | $0 | |
| Inventory | $21,000 | $23,153 | $25,526 | $28,142 | $31,027 | |
| Total Current Assets | $37,710 | $113,340 | $184,482 | $286,712 | $423,416 | |
| Fixed assets | $246,450 | $246,450 | $246,450 | $246,450 | $246,450 | |
| Depreciation | $36,960 | $73,920 | $110,880 | $147,840 | $184,800 | |
| Net fixed assets | $209,490 | $172,530 | $135,570 | $98,610 | $61,650 | |
| TOTAL ASSETS | $247,200 | $285,870 | $320,052 | $385,322 | $485,066 | |
| LIABILITIES & EQUITY | ||||||
| Debt | $317,971 | $272,546 | $227,122 | $181,698 | $136,273 | |
| Accounts payable | $9,660 | $10,187 | $10,210 | $10,694 | $11,170 | |
| Total Liabilities | $327,631 | $282,733 | $237,332 | $192,391 | $147,443 | |
| Share Capital | $0 | $0 | $0 | $0 | $0 | |
| Retained earnings | ($80,431) | $3,137 | $82,720 | $192,930 | $337,623 | |
| Total Equity | ($80,431) | $3,137 | $82,720 | $192,930 | $337,623 | |
| TOTAL LIABILITIES & EQUITY | $247,200 | $285,870 | $320,052 | $385,322 | $485,066 |
5 Year Annual Cash Flow Statement
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| CASH FLOW FROM OPERATIONS | |||||
| Net Income (Loss) | ($80,431) | $83,568 | $79,583 | $110,210 | $144,693 |
| Change in working capital | ($11,340) | ($1,625) | ($2,350) | ($2,133) | ($2,409) |
| Depreciation | $36,960 | $36,960 | $36,960 | $36,960 | $36,960 |
| Net Cash Flow from Operations | ($54,811) | $118,902 | $114,193 | $145,037 | $179,244 |
| CASH FLOW FROM INVESTMENTS | |||||
| Investment | ($246,450) | $0 | $0 | $0 | $0 |
| Net Cash Flow from Investments | ($246,450) | $0 | $0 | $0 | $0 |
| CASH FLOW FROM FINANCING | |||||
| Cash from equity | $0 | $0 | $0 | $0 | $0 |
| Cash from debt | $317,971 | ($45,424) | ($45,424) | ($45,424) | ($45,424) |
| Net Cash Flow from Financing | $317,971 | ($45,424) | ($45,424) | ($45,424) | ($45,424) |
| SUMMARY | |||||
| Net Cash Flow | $16,710 | $73,478 | $68,769 | $99,613 | $133,819 |
| Cash at Beginning of Period | $0 | $16,710 | $90,188 | $158,957 | $258,570 |
| Cash at End of Period | $16,710 | $90,188 | $158,957 | $258,570 | $392,389 |
