How to Form a Mortgage Company in Texas | Essential Steps

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Texas Mortgage Company

The mortgage industry plays a crucial role in the economy as it facilitates the dream of homeownership of Texas people. Forming a mortgage company can be a rewarding and profitable LLC in Texas. 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 Texas 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 Texas mortgage company, all the steps in this article must guide you.

How to Form a Mortgage Company in Texas

What is a Mortgage Company?

In Texas, 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 Texas Department of Savings and Mortgage Lending regulates mortgage companies in Texas 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 Texas 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 Texas 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 Texas 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 Texas

Forming a mortgage company in Texas 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 Texas 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 Texas Department of Savings and Mortgage Lending. The Texas Department of Savings and Mortgage Lending is responsible for licensing and regulating mortgage companies and their activities within the state.

Before starting a mortgage company in Texas, it is essential to understand the different types of mortgage licenses and activities regulated by the Texas Department of Savings and Mortgage Lending. 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 Texas.

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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 Texas, 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 Texas include:

Sole Proprietorship

This is the simplest form of business entity, where an individual operates the Texas 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 Texas 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 Texas, consult a Business Attorney in Texas 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 Texas 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 Texas 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 Texas 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 Texas in your business name can help establish a sense of familiarity and trust with potential clients from the same state. For example, “Texas Mortgage Solutions” or “Texas 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 Texas Comptroller of Public Accounts Taxable Entity Search to ensure that no one else has trademarked the name. There is a complete guide on Texas 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 Texas DBA (doing business as). 

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

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Choose a Registered Agent

A Registered Agent is a person or entity designated to receive important legal documents and correspondence for your business. In Texas, every business entity, such as an LLC or a corporation, must have a Registered Agent with a physical address within Texas. The Registered 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 Texas, the cost of having a Registered Agent ranges from $50 – $200. However, suppose you are still wondering how to hire a Registered Agent. You can also serve as your Registered Agent, appoint a friend or family member, or hire a professional Texas Registered Agent Services.

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File for Certificate of Formation or Certificate of Formation – For Profit Corporation

If you form an LLC for your Texas mortgage company, you must file the Texas Certificate of Formation, which costs $300. However, you must file the Certificate of Formation – For Profit Corporation if you form a Corporation for your Texas 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 Texas if you will open a bank account or hire an employee for your Texas mortgage company. 

The application of an EIN in Texas 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 Texas Department of Savings and Mortgage Lending to operate a mortgage company in Texas. 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 Texas:

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 Texas Department of Savings and Mortgage Lending. 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 Texas Department of Savings and Mortgage Lending.
  6. Pay the applicable licensing and application fee of $1,100.

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 Texas 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 Texas 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 Texas 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 Texas 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

How do I form a mortgage company in Texas?
You need to register with the Texas Department of Savings and Mortgage Lending.
What is the minimum net worth requirement for a mortgage company in Texas?
The minimum net worth requirement in Texas is $63,000.
Where do I get information on obtaining a license to become a mortgage loan originator in Texas?
You can find information about obtaining a license from the Texas Department of Savings and Mortgage Lending.
How do I ensure compliance with the state’s mortgage laws when forming a company in Texas?
You need to make sure you follow all applicable laws and regulations set forth by the state of Texas.
Do I need to be a resident of Texas to form a mortgage company in Texas?
No, you do not have to be a resident of Texas to form a mortgage company.
Does Texas require continuing education for mortgage companies?
Yes, Texas requires mortgage professionals to complete a number of hours of continuing education each year.
What are the requirements for becoming a licensed mortgage company in Texas?
As a mortgage company in Texas, you must abide by all the state’s requirements, which include meeting minimum net worth requirements and passing background checks.
Can I use social media to solicit mortgage clients in Texas?
Yes, you can use social media to solicit mortgage clients in Texas under certain conditions.
What is the first step to forming a mortgage company in Texas?
You need to register with the Texas Department of Savings and Mortgage Lending.
Are mortgage companies in Texas required to have audits performed?
Yes, mortgage companies in Texas are required to have yearly independent audits conducted.
Are there any exemptions in Texas’ mortgage laws that may apply to a mortgage company?
Yes, the state allows for limited regulation exemptions for mortgage companies who meet certain conditions.
Is it possible to have more than one state license to conduct business in Texas as a mortgage company?
Yes, it’s possible to have multiple licenses to conduct business in Texas as a mortgage company.
How long does it take to get licensed as a mortgage company in Texas?
The length of time varies depending on each applicant and can take several months to complete the process of obtaining a license.
Can I offer mortgage products and services in Texas from another state?
If you are properly licensed to operate in the state of Texas, you may offer services from another state.
What type of business entity should I form when starting a mortgage company in Texas?
The appropriate business entity requires custom business related guidance facilitating company growth yet minimizing ownership personal liability.
Do I need to pass an exam to become a licensed mortgage company in Texas?
Applicants for a residential mortgage entity license are not required to sit for an examination
Are non-residents eligible to become licensed mortgage companies and operate them within the state of Texas?
Yes, non-residents are also eligible to become licensed and operate a mortgage company within the state of Texas.
Compared to other states, how many licensing laws are there for establishing a Texas-based mortgage company?
Licensing laws depend on various factors like the company objectives, the line of service, start and scale of the service, dues proof accounts and other legal business concerns yet satisfactory guidance is needed.
Can a delinquent status for student loans disqualify someone from being licensed as a mortgage company in Texas?
Yes, delinquent student loan status may preclude you from obtaining a license for a mortgage company in Texas.
When is a mortgage company required to file an annual report with Texas Department of Savings and Mortgage Lending?
Mortgage companies are required to file their annual reports with Texas Department of Savings and Mortgage Lending by March 31st.
Can I mail a check that satisfies any licensing fees associated with mortgage companies?
Monday to Friday between 7 am – 5 pm excluding State approved holidays throughout the year, Mastercard, Visa, and account assessing network like Federal American Express are accepted.
How long are mortgage company licenses valid in Texas?
Licenses are valid to the end of the year of issuance unless extended or reconsidered by the Commissioner based on good cause.
Where do I find information as a Texas resident to assess qualifications for a mortgage company?
Obtaining qualifying information as a resident requires attention, assessment measures obtaining legal guidelines available from Texas Mortgage Licensing laws.
What types of bonding options are available to mortgage companies operating in Texas?
Texas law expects registered mortgage companies to hold at minimum a $50,000 surety bond, although larger bond amounts could be necessary depending on business operations.
Are foreign nationals, with legal entry processing allowed to operate mortgage companies within Texas once licensed?
Yes, accomplished foreign national entrepreneurs are eligible to form and operate mortgage companies within Texas once having acquired the requisite licensing, requirements are met-based.
As a pre-license candidate for a mortgage company in Texas, what are my obligations per state licensing requirements laws?
It is obligatory to adopt facilities to comply with Texas mortgage laws that protect consumers and there will be specific criteria such as requirements for submission of documentation to satisfy licensing requirements.
Do those making an application before the allowable timeline period intend to be subject to dismissal in Texas?
Such a disparaging action brought outside the timeline period could suggest the accusation of no sufficient time aloweration from violations relating to requirements in that domain, resulting in fairness reduction to company affiliations as well as military officers.
What are the legal requirements for forming a mortgage company in Texas?
A mortgage company in Texas must be registered as a business entity with the Texas Secretary of State.
Are there any specific licenses required to form a mortgage company in Texas?
Yes, a mortgage company in Texas must obtain a license from the Texas Department of Savings and Mortgage Lending.
How long does it take to obtain a mortgage company license in Texas?
Generally, it takes about 60 to 90 days to process a mortgage company license application in Texas.
Do employees of a Texas mortgage company need to be licensed?
Yes, all mortgage loan originators in Texas must be licensed by the Texas Department of Savings and Mortgage Lending.
What types of loans can a mortgage company in Texas offer?
A mortgage company in Texas can offer conventional loans, FHA loans, VA loans, and USDA loans.
Is there a limit on how much a Texas mortgage company can loan to a borrower?
Yes, there are maximum loan limits for different types of loans that a Texas mortgage company can offer.
Can a mortgage company in Texas charge prepayment penalties?
Yes, a mortgage company in Texas can charge prepayment penalties on some loans.
Are there any restrictions on mortgage company advertising in Texas?
Yes, mortgage company advertising in Texas must comply with certain Texas-specific advertising rules.
What is the maximum interest rate a Texas mortgage company can charge?
There is no maximum interest rate set by the state of Texas for mortgage loans.
Can a Texas mortgage company require a borrower to purchase mortgage insurance?
Yes, a Texas mortgage company can require a borrower to purchase mortgage insurance.
Can a Texas mortgage company sell its loans on the secondary market?
Yes, Texas mortgage companies can sell loans on the secondary market.
Can a Texas mortgage company offer adjustable-rate mortgages?
Yes, Texas mortgage companies can offer adjustable-rate mortgages.
What are some common challenges for Texas mortgage companies?
Common challenges for Texas mortgage companies include regulatory compliance, changing interest rates, and competition from other lenders.
Can a property be foreclosed on in Texas without a court order?
Yes, under certain circumstances a property can be foreclosed on in Texas without a court order.
Are there any borrower protections against foreclosure in Texas?
Texas law requires that certain notices and warnings be given to borrowers before foreclosure proceedings can begin.
What is the process for obtaining a residential mortgage loan in Texas?
The process for obtaining a residential mortgage loan in Texas is similar to the process in other states. A borrower typically applies for a loan, has an underwriter review the application, and then goes through a closing process.
Can a Texas mortgage company charge fees for processing a loan application?
Yes, Texas mortgage companies can charge fees for loan processing and other services related to the loan.
Does Texas have any specific laws related to mortgage loan modifications?
Yes, Texas has specific laws related to mortgage loan modifications, including certain notices and disclosures that must be provided to borrowers.
What happens if a borrower in Texas default on a mortgage loan?
If a borrower in Texas defaults on a mortgage loan, the company can pursue foreclosure proceedings against the property.
Can Texas mortgage companies provide loan pre-approval letters to borrowers?
Yes, Texas mortgage companies can provide pre-approval letters to borrowers, but the pre-approval is not a guarantee of a loan.
Can a Texas mortgage company offer jumbo mortgage loans?
Yes, Texas mortgage companies can offer jumbo mortgage loans.
Are there any restrictions on the amount of closing costs charged by Texas mortgage companies?
While there is no limit on overall closing costs in Texas, certain fees cannot exceed a certain percentage of the loan amount.
What is the First Time Homebuyer Program in Texas?
The First Time Homebuyer Program in Texas provides eligible borrowers with low-interest loans to help make homeownership more affordable.
Are there any tax credits available to Texas mortgage borrowers?
Texas offers several tax credits and exemptions for homebuyers, including the Homestead Exemption and Mortgage Credit Certificate Program.
Can a Texas mortgage company provide assistance with down payments?
Yes, some Texas mortgage companies provide assistance with down payments through down payment assistance programs or grants.
What types of property can a Texas mortgage company lend on?
Texas mortgage companies can lend on residential and commercial property, including single-family homes, condominiums, townhouses, and property being used for business purposes.
Are non-Texas residents eligible to obtain a mortgage loan for Texas property?
Yes, non-Texas residents can obtain a mortgage loan for Texas property, but there may be some additional documentation required.
Can Texas mortgage companies offer specialist mortgage products, such as buy-to-let?
Yes, Texas mortgage companies can offer specialist mortgage products, such as buy-to-let mortgages.

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Conclusion

Forming a mortgage company in Texas 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 Texas.

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