How to Form a Mortgage Company in Arizona | Essential Steps

Steve Bennett
Business Formation Expert  |   Fact Checked by Editorial Team
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Arizona Mortgage Company

The mortgage industry plays a crucial role in the economy as it facilitates the dream of homeownership of Arizona people. Forming a mortgage company can be a rewarding and profitable LLC in Arizona. However, it requires a deep understanding of the industry, regulatory requirements, and the necessary steps to establish and run a successful mortgage company. This comprehensive guide will walk you through Forming a Mortgage Company in Arizona and provide valuable insights to help you succeed in this competitive industry.

Webinarcare Editorial Team will help you gain knowledge through thorough research and market study. Before forming your Arizona mortgage company, all the steps in this article must guide you.

What is a Mortgage Company?

In Arizona, a mortgage company is a business, often structured as a Limited Liability Company (LLC), that specializes in originating, funding, and servicing mortgage loans for homebuyers and property owners. These companies play a crucial role in the local housing market as they facilitate obtaining a mortgage loan for individuals looking to purchase, refinance, or invest in residential properties.

The Arizona Department of Financial Institutions regulates mortgage companies in Arizona and must obtain the appropriate licenses to operate legally. There are different types of mortgage companies, such as mortgage brokers, lenders, and loan originators, each with specific roles and responsibilities within the mortgage industry.

  • Mortgage brokers act as intermediaries between borrowers and mortgage lenders, assisting homebuyers in finding the Best Arizona Small Business Loan product and terms to suit their needs.
  • Mortgage lenders are financial institutions that provide the funds for mortgage loans directly or through a network of mortgage brokers.
  • Mortgage loan originators are individuals employed by mortgage companies who work with borrowers to process and submit loan applications, negotiate loan terms, and complete the mortgage transaction.

Operating a mortgage company in Arizona requires a deep understanding of the local housing market, industry regulations, and the various mortgage products available to borrowers. By providing valuable services and expertise to homebuyers and property owners, mortgage companies in Arizona play a vital role in helping individuals achieve their homeownership dreams and supporting the state’s overall economy.

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How to Form a Mortgage Company in Arizona

Forming a mortgage company in Arizona can be complex, but the following step-by-step guide will help you navigate the requirements and regulations.

Step 1: Understanding the Mortgage Industry

The mortgage industry in Arizona is governed by various state and federal laws and regulations designed to protect consumers and ensure a fair and stable market—the primary regulatory authority for mortgage companies in Arizona Department of Financial Institutions. The Arizona Department of Financial Institutions is responsible for licensing and regulating mortgage companies and their activities within the state.

Before starting a mortgage company in Arizona, it is essential to understand the different types of mortgage licenses and activities regulated by the Arizona Department of Financial Institutions. These include:

Mortgage BrokerA person or entity that, for compensation or gain, assists borrowers in obtaining mortgage loans from third-party lenders.
Mortgage LenderA person or entity that originates, funds, or services mortgage loans.
Mortgage Loan Originator (MLO)An individual who, for compensation or gain, takes mortgage loan applications or offers or negotiates terms of mortgage loans.

It is suggested that you speak with a legal professional before you begin setting up a mortgage company. They’ll understand what’s best for you and your future company. To safeguard your personal assets from business debts, you can always start an LLC in Arizona.

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Step 2: Forming a Legal Entity

Once you clearly understand the mortgage industry and the specific license type you want to pursue in Arizona, the next step is to form a legal entity for your mortgage company. The most common types of legal entities for forming a mortgage company in Arizona include:

Sole Proprietorship

This is the simplest form of business entity, where an individual operates the Arizona mortgage company under their name or a trading name. There are no formal registration requirements, but the owner is responsible for all business debts and liabilities.

Partnership

A partnership is a business entity where two or more individuals come together to form a mortgage company. All partners are personally liable for the business’s debts and liabilities in a General Partnership. Limited Partnerships and Limited Liability Partnerships offer some protection for partners from personal liability.

Limited Liability Company (LLC)

An LLC is popular for forming a mortgage company, combining a corporation’s liability protection with a partnership’s tax flexibility. LLC owners, known as members, are not personally liable for the business’s debts and liabilities. 

Corporation 

A corporation is a legal entity separate from its owners, known as shareholders. Starting a corporation in Arizona provides liability protection for its owners and is subject to corporate taxation. Forming a corporation involves more administrative requirements and fees than other business structures. There are different types of corporations, such as S and C corporations, each with tax implications and requirements.

To form a mortgage company in Arizona, consult a Business Attorney in Arizona to understand the state’s requirements for forming a legal entity and obtaining necessary licenses and permits.

Step 3: Developing a Business Plan

A well-crafted business plan is essential for the success of your Arizona mortgage company. The business plan should outline your company’s mission, vision, objectives, target market, competitive analysis, marketing strategy, financial projections, and management structure.

Your business plan will serve as a roadmap for your company’s growth and help you secure financing or investment to start and grow your business.

Step 4: Register Your Mortgage Company

You must register your Arizona mortgage company. Here are the guidelines you must accomplish before obtaining the licenses and permits.

Choose a Business Name

Choosing a business name for your Arizona mortgage company involves several steps. Here are some guidelines to help you choose an effective name:

  • Your business name should reflect the brand identity you want to convey to your potential clients. Consider your target audience, your company’s values, and the services you offer when choosing a name.
  • Including words related to the mortgage industry in your business name can help potential clients understand the nature of your business. Some keywords to consider are “mortgage,” “loan,” “home,” “finance,” or “lending.”
  • Including the name of Arizona in your business name can help establish a sense of familiarity and trust with potential clients from the same state. For example, “Arizona Mortgage Solutions” or “Arizona Home Loan Experts.”
  • A shorter, easy-to-remember name can make it easier for potential clients to recall your business when they need mortgage services.

Remember to check the availability of your chosen business name with the Arizona Corporation Commission eCorp to ensure that no one else has trademarked the name. There is a complete guide on Arizona Business Name Search for you to have a mortgage company name. You can register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for Arizona DBA (doing business as)

Once you’ve settled on a unique name, you can proceed with choosing a Statutory Agent down to obtaining any required licenses and permits.

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Choose a Statutory Agent

A Statutory Agent is a person or entity designated to receive important legal documents and correspondence for your business. In Arizona, every business entity, such as an LLC or a corporation, must have a Statutory Agent with a physical address within Arizona. The Statutory Agent’s primary role is to ensure that your business complies with state regulations and be available to receive any legal notices or official government correspondence.

In Arizona, the cost of having a Statutory Agent ranges from $50 – $150. However, suppose you are still wondering how to hire a Statutory Agent. You can also serve as your Statutory Agent, appoint a friend or family member, or hire a professional Arizona Statutory Agent Services.

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File for Articles of Organization or Articles of Incorporation

If you form an LLC for your Arizona mortgage company, you must file the Arizona Articles of Organization, which costs $50. However, you must file the Articles of Incorporation if you form a Corporation for your Arizona mortgage company. 

Including accurate and comprehensive information on this page is essential since mistakes or inconsistencies may delay or dismiss your filing.

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Obtain an Employer Identification Number

You must first obtain an Employer identification number (EIN) in Arizona if you will open a bank account or hire an employee for your Arizona mortgage company. 

The application of an EIN in Arizona can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone (International Applicants) – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

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Step 5: Obtaining Licenses and Registrations

You must obtain a license from the Arizona Department of Financial Institutions to operate a mortgage company in Arizona. The licensing requirements vary depending on the mortgage activity you plan to engage in (e.g., mortgage broker, mortgage lender, or mortgage loan originator).

Here are the general steps to obtain a mortgage license in Arizona:

nmls

  1. Complete a license application through the Nationwide Mortgage Licensing System (NMLS). The NMLS is a web-based system that allows mortgage companies and MLOs to apply for, update, and renew their licenses online.
  2. Complete pre-licensing education and pass the NMLS national and state-specific mortgage exams.
  3. Submit fingerprints for a criminal background check and authorize a credit report through the NMLS.
  4. Obtain a surety bond in an amount specified by the Arizona Department of Financial Institutions. The bond amount will depend on the type of mortgage license you are applying for and the volume of your mortgage loan activity.
  5. Provide proof of financial responsibility, such as a minimum net worth or a fidelity bond, as required by the Arizona Department of Financial Institutions.
  6. Pay the applicable licensing and application fee of $1,500.

In addition to the mortgage license, you may also need to obtain other licenses, permits, or registrations, depending on your business activities and local requirements. The business license fee in Arizona ranges from $50 – $300.

Step 6: Setting Up Your Office and Infrastructure

A professional and well-equipped office is essential for the smooth operation of your Arizona mortgage company. Choose a suitable location for your office, considering accessibility, visibility, and proximity to your target market. Ensure your office complies with the Americans with Disabilities Act (ADA) and other local building codes and regulations.

Step 7: Hiring and Training Staff

Your Arizona mortgage company’s success will largely depend on your team’s quality and expertise. Hire qualified and experienced professionals, such as mortgage loan originators, processors, underwriters, and administrative staff. However, ensure that your team members meet the necessary licensing and education requirements before hiring an employee for your Arizona mortgage company.

Step 8: Marketing and Growing The Company

A well-thought-out marketing strategy is crucial for attracting clients and growing your mortgage company. Some effective marketing tactics for your mortgage company include:

  • Build a professional website showcasing your services, expertise, and testimonials from satisfied clients.
  • Leverage social media platforms to create brand awareness and engage your target audience.
  • Networking with real estate agents, builders, and other industry professionals to build referral partnerships.
  • Participating in local community events and sponsoring charitable causes to create a positive brand image.
  • Offering educational content, such as blog articles, webinars, and seminars, to provide value to your clients and establish yourself as an expert in the mortgage industry.

FAQs

What do I need to start a mortgage company in Arizona?
To start a mortgage company in Arizona, you will need to meet the state licensing requirements, which include obtaining a surety bond, registering with the Arizona Corporation Commission, and meeting net worth and experience requirements.
How much net worth is required to start a mortgage company in Arizona?
The required net worth to start a mortgage company in Arizona is dependent on the size of the company, but it can range from $25,000 to $500,000.
What is the licensing process like for a mortgage company in Arizona?
The licensing process for a mortgage company in Arizona involves registering with the Arizona Corporation Commission, passing background checks, obtaining a surety bond, and meeting net worth and experience requirements.
Can I apply for a mortgage broker license in Arizona with a criminal record?
Depending on the severity of the crime, you may still be eligible to apply for a mortgage broker license in Arizona, but your application will be subject to a review.
Do I need to pass an exam to become a licensed mortgage broker in Arizona?
Yes, you need to pass both state and national exams to become a licensed mortgage broker in Arizona.
How long does it take to get a mortgage broker license in Arizona?
It usually takes around 4-6 months to get a mortgage broker license in Arizona, depending on the speed of application processing and how quickly you can complete the registration and education requirements.
What are the educational requirements for a mortgage broker license in Arizona?
To become a licensed mortgage broker in Arizona, you need to complete 20 hours of pre-licensing education and 8 hours of continuing education per year.
Can out-of-state companies operate as mortgage brokers in Arizona?
Yes, out-of-state companies can operate as mortgage brokers in Arizona as long as they comply with the state’s licensing and registration requirements.
What types of mortgage companies can I form in Arizona?
The types of mortgage companies you can form in Arizona include mortgage brokers, mortgage bankers, and mortgage loan originators.
Can I own a mortgage brokerage and a real estate company in Arizona at the same time?
Yes, there are no restrictions against owning a mortgage brokerage and a real estate company in Arizona at the same time, but there are separate licensing requirements for each.
What is the cost of starting a mortgage company in Arizona?
The cost of starting a mortgage company in Arizona can vary depending on various factors such as licensing fees, registration fees, surety bond expenses, office space, employee salary, website development, marketing expenses, and ongoing operating costs.
Is it possible to obtain a license exemption for being a mortgage loan originator in Arizona?
Yes, mortgage loan originators can apply for a license exemption in Arizona if they meet certain criteria, such as only working for one lender and not participating in any predatory lending practices.
Can I register both as an individual and as a corporate entity to operate a mortgage company in Arizona?
Yes, you can register both as an individual and as a corporate entity to operate a mortgage company in Arizona, but you will need to determine which arrangement works best for you based on your business goals and legal constraints.
How many years of experience do I need to become a licensed mortgage broker in Arizona?
The exact number of years of experience required to become a licensed mortgage broker in Arizona varies depending on the size and type of the mortgage company you plan to form.
Can I run a mortgage company in Arizona as a home-based business?
Yes, you can run a mortgage company as a home-based business in Arizona, but you need to comply with local zoning regulations and obtain the necessary licensing and registration requirements.
Can I partner with other mortgage brokers in Arizona to operate a mortgage company?
Yes, you can partner with other mortgage brokers in Arizona to operate a mortgage company, but all partners need to comply with the state’s licensing and registration requirements.
Are there any exemptions from obtaining a surety bond to operate a mortgage company in Arizona?
No, all mortgage companies in Arizona are required to obtain a surety bond as part of the licensing and registration process.
Can I hire agents to work as mortgage loan originators in my company in Arizona?
Yes, you can hire agents to work as mortgage loan originators in your company in Arizona, but you are responsible for ensuring that they meet the state’s licensing and registration requirements.
Do mortgage companies in Arizona need to complete any annual reporting requirements?
Yes, all mortgage companies in Arizona are required to complete annual reporting requirements to maintain their licenses and registration.
Can I operate as a sole proprietor as a mortgage broker in Arizona?
No, mortgage brokers in Arizona are required to register their businesses as corporations or limited liability companies before acquiring a license.
Do Arizona mortgage companies need to comply with federal laws and regulations?
Yes, all mortgage companies in Arizona need to comply with federal laws and regulations, such as the Truth in Lending Act and the Real Estate Settlement Procedures Act.
Can I apply for a mortgage broker license in Arizona with a bankruptcy in my past?
Depending on the severity of the bankruptcy and how long ago it occurred, you may still be eligible to apply for a mortgage broker license in Arizona, but your application will be subject to a review.
Can a mortgage brokerage in Arizona offer home loans to borrowers nationwide?
Yes, a mortgage brokerage in Arizona can offer home loans to borrowers nationwide as long as it complies with any relevant laws and regulations.
Can a real estate agent act as a mortgage broker in Arizona?
Yes, a real estate agent can act as a mortgage broker in Arizona as long as they obtain the required licenses and registrations.
Do Arizona mortgage companies need to be insured?
Although not typically mandatory, it is recommended that mortgage companies in Arizona obtain insurance to protect themselves from potential financial risks and liabilities.
Can I operate a mortgage company in Arizona without a physical office location?
Yes, you can operate a mortgage company in Arizona without a physical office location, as long as you comply with the state’s licensing and registration requirements.
Do I need to renew my mortgage broker license in Arizona each year?
Yes, mortgage broker licenses in Arizona need to be renewed annually, and you will need to complete continuing education requirements to keep your license active.
Do lenders in Arizona require borrowers to provide any specific documentation to apply for a home loan?
Yes, lenders in Arizona typically require borrowers to provide proof of income, tax returns, bank statements, and other documents as part of the loan application process.
What is the process of forming a mortgage company in Arizona?
The process of forming a mortgage company in Arizona involves obtaining the proper licenses and permits, registering with the Arizona Corporation Commission, and following the applicable state and federal regulations.
What licenses and permits are required to form a mortgage company in Arizona?
The licenses and permits required to form a mortgage company in Arizona include a Mortgage Banker License and a Mortgage Broker License, both of which are issued by the Arizona Department of Financial Institutions.
What is the difference between a Mortgage Banker and a Mortgage Broker in Arizona?
In Arizona, a Mortgage Banker is a company that lends its own funds for mortgage loans while a Mortgage Broker is a company that acts as an intermediary between the borrower and the lender.
Do I need a license to work as a loan officer in Arizona?
Yes, loan officers in Arizona must be licensed by the Arizona Department of Financial Institutions.
Can I form a mortgage company as a sole proprietor in Arizona?
No, in Arizona you must form a limited liability company (LLC) or corporation to operate a mortgage company.
How long does it take to obtain a Mortgage Banker License in Arizona?
The process to obtain a Mortgage Banker License in Arizona can take several months, depending on the completeness of the application and the financial and background checks.
How much does it cost to obtain a Mortgage Broker License in Arizona?
The cost to obtain a Mortgage Broker License in Arizona is $950 plus additional fees for each registered loan officer.
What are the bonding requirements for a Mortgage Banker in Arizona?
Mortgage Bankers in Arizona must have a surety bond in the amount of $100,000.
Can I operate a mortgage company in Arizona from another state?
Yes, you can operate a mortgage company in Arizona from another state but must still comply with Arizona state laws and regulations.
How do I register for a Mortgage Broker License in Arizona?
To register for a Mortgage Broker License in Arizona, you must apply through the Nationwide Multistate Licensing System (NMLS).
What is the minimum credit score required to obtain a Mortgage Broker License in Arizona?
There is no minimum credit score requirement to obtain a Mortgage Broker License in Arizona, but any prior bankruptcies or foreclosures must be disclosed on the application.
Are there any requirements for office space or location in order to form a mortgage company in Arizona?
Arizona does not have specific office space or location requirements for mortgage companies, but your business must have a physical location in the state.
Do Mortgage Brokers in Arizona need to have a physical office space?
Yes, Mortgage Brokers in Arizona must have a physical office space in the state.
Are there any residency requirements to form a mortgage company in Arizona?
There are no residency requirements to form a mortgage company in Arizona, but you must have a registered agent with a physical address in the state.
What are the fees associated with registering a mortgage company with the Arizona Corporation Commission?
Fees for registering a mortgage company with the Arizona Corporation Commission vary depending on your business structure and the services you offer.
Does Arizona have annual reporting requirements for mortgage companies?
Yes, all mortgage companies in Arizona must file annual reports with the Arizona Corporation Commission.
How often are mortgage licenses renewed in Arizona?
Mortgage licenses in Arizona are renewed every year and must be done through the NMLS.
What are the continuing education requirements for mortgage professionals in Arizona?
Mortgage professionals in Arizona must complete 8 hours of continuing education every year.
Are there any restrictions on the types of fees a mortgage company can charge in Arizona?
Mortgage companies in Arizona are regulated on which fees they can and cannot charge. For full details please refer to title 6 of Arizona State Statutes.
Can I form a mortgage company as a partnership in Arizona?
Yes, you can form a mortgage company as a partnership in Arizona.
As a Mortgage Banker, can I originate loans for properties located outside of Arizona?
Yes, Mortgage Bankers in Arizona can originate loans for properties located outside of the state.
Are there any financial requirements to form a mortgage company in Arizona?
Arizona does not have specific financial requirements to form a mortgage company, but you must have enough funding to cover your startup costs and initial expenses.
Can I apply for both a Mortgage Banker and Mortgage Broker License in Arizona?
Yes, you can apply for both a Mortgage Banker License and a Mortgage Broker License in Arizona.
How do I obtain funding for my mortgage company in Arizona?
Funding for your mortgage company in Arizona can be obtained either through traditional lenders or through private investors.
What are the penalties for violating Arizona’s mortgage laws and regulations?
The penalties for violating Arizona’s mortgage laws and regulations can include fines, license suspension or revocation, and legal action.
Is it necessary to hire an attorney in Arizona to form a mortgage company?
While it is not explicitly required, hiring an attorney can be helpful in navigating the legal aspects of forming a mortgage company in Arizona.
How long does it take to form a mortgage company in Arizona?
The length of time it takes to form a mortgage company in Arizona depends on many factors, including the completeness of your application, approval from regulatory agencies, and any legal obstacles.
Is it possible to form a mortgage company in Arizona without any prior experience?
Yes, it is possible to form a mortgage company in Arizona without any prior experience, but you must still obtain the appropriate licenses and comply with all state and federal regulations. It is wise to better understand the industry before starting a mortgage company.If you don’t have any prior experience, you will need to hire experienced professionals to help you with the process.

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Conclusion

Forming a mortgage company in Arizona can be fulfilling and profitable. By understanding the industry, forming a solid business foundation, obtaining the necessary licenses, and implementing effective marketing strategies, you can build a successful mortgage company that helps make the dream of homeownership a reality for countless individuals and families in Arizona.

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