How to Form a Mortgage Company in Virginia | Essential Steps

Steve Bennett
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Virginia Mortgage Company

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

What is a Mortgage Company?

In Virginia, 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 Virginia Bureau of Financial Institutions regulates mortgage companies in Virginia 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 Virginia 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 Virginia 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 Virginia 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 Virginia

Forming a mortgage company in Virginia 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 Virginia 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 Virginia Bureau of Financial Institutions. The Virginia Bureau of Financial Institutions is responsible for licensing and regulating mortgage companies and their activities within the state.

Before starting a mortgage company in Virginia, it is essential to understand the different types of mortgage licenses and activities regulated by the Virginia Bureau 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 Virginia.

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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 Virginia, 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 Virginia include:

Sole Proprietorship

This is the simplest form of business entity, where an individual operates the Virginia 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 Virginia 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 Virginia, consult a Business Attorney in Virginia 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 Virginia 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 Virginia 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 Virginia 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 Virginia in your business name can help establish a sense of familiarity and trust with potential clients from the same state. For example, “Virginia Mortgage Solutions” or “Virginia 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 Virginia State Corporation Commission Entity Search to ensure that no one else has trademarked the name. There is a complete guide on Virginia 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 Virginia 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 Virginia, every business entity, such as an LLC or a corporation, must have a Registered Agent with a physical address within Virginia. 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 Virginia, the cost of having a Registered Agent ranges from $50 – $150. 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 Virginia Registered Agent Services.

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File for Articles of Organization or Articles of Incorporation

If you form an LLC for your Virginia mortgage company, you must file the Virginia Articles of Organization, which costs $100. However, you must file the Articles of Incorporation if you form a Corporation for your Virginia 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 Virginia if you will open a bank account or hire an employee for your Virginia mortgage company. 

The application of an EIN in Virginia 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 Virginia Bureau of Financial Institutions to operate a mortgage company in Virginia. 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 Virginia:

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 Virginia Bureau 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 Virginia Bureau of Financial Institutions.
  6. Pay the applicable licensing and application fee of $1,000.

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 Virginia 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 Virginia 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 Virginia 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 Virginia 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 is the process for starting a mortgage company in Virginia?
The process for starting a mortgage company in Virginia involves obtaining the required licenses and registering with state and federal regulatory agencies.
What licenses are required to start a mortgage company in Virginia?
Virginia requires mortgage companies to obtain a Mortgage Lender license from the Virginia Bureau of Financial Institutions.
How long does it take to get a Mortgage Lender license in Virginia?
It typically takes several months to obtain a Mortgage Lender license in Virginia.
Do I need to register with the Nationwide Multistate Licensing System (NMLS) to start a mortgage company in Virginia?
Yes, Virginia mortgage companies are required to register with the NMLS.
What are the requirements for registering with the NMLS in Virginia?
The requirements for registering with the NMLS in Virginia include completing corresponding NMLS Forms and passing a background check.
What other regulatory agencies do I need to register with to start a mortgage company in Virginia?
Virginia mortgage companies may also need to register with the federal Consumer Financial Protection Bureau (CFPB).
Is there a minimum net worth requirement to start a mortgage company in Virginia?
Virginia does not have a specific net worth requirement for mortgage companies, but companies will be expected to demonstrate their ability to meet their financial obligations.
Do I need to have prior experience in the mortgage industry to start a mortgage company in Virginia?
Virginia does not have specific requirements for prior industry experience, but relevant experience may be helpful in obtaining licenses and complying with regulations.
Do I need to demonstrate financial liquidity to start a mortgage company in Virginia?
Yes, Virginia mortgage companies must demonstrate sufficient financial liquidity to meet operational needs and cover potential liabilities.
Can my mortgage company be registered in Virginia but operate in other states?
Yes, Virginia-based mortgage companies can operate in other states by obtaining necessary licenses in those states.
What is the mortgage origination process like in Virginia?
The mortgage origination process involves securing funding for property purchases and negotiating terms with borrowers and lenders.
What are the typical mortgage rates in Virginia?
Mortgage rates in Virginia vary depending on the current market, but rates are generally in line with national averages.
Can mortgage companies charge different mortgage rates to different borrowers in Virginia?
No, mortgage companies in Virginia are required to charge the same rate to borrowers with similar financial and credit profiles.
Are mortgage brokers required to disclose any fee increases in Virginia?
Yes, mortgage brokers in Virginia must provide written notice of any fee increases at least three days before closing.
Are there any limitations on prepayment penalties for mortgage loans in Virginia?
Virginia law limits prepayment penalties for mortgage loans to a maximum of 2% of the outstanding balance if they are charged within the first two years of the loan.
What is the process for foreclosure in Virginia?
Virginia allows for both judicial and non-judicial foreclosure processes, but mortgage companies must follow specific legal guidelines in either case.
Are deficiency judgments permitted in Virginia foreclosure proceedings?
Yes, deficiency judgments are permitted in Virginia foreclosure proceedings.
What is the timeframe for completing a Virginia foreclosure?
Foreclosure timelines in Virginia can vary, but the process generally takes several months to a year or more.
Are mortgage companies required to provide mediation options for distressed borrowers in Virginia?
Virginia law allows for mediation as an option for homeowners facing foreclosure, but mortgage companies are not required to provide mediation.
Are there any specific regulations for advertising mortgage loans in Virginia?
Virginia regulations require mortgage companies to disclose specific information in advertising such as the name of the company, loan terms, and applicable fees.
Do Virginia mortgage companies have to follow federal mortgage disclosure requirements?
Yes, Virginia mortgage companies must comply with federal disclosure requirements such as the Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA).
How are mortgage brokers compensated in Virginia?
Mortgage brokers in Virginia are typically compensated through fees paid by borrowers or lenders or through commissions based on loan volume.
Are mortgage originators in Virginia required to hold licenses?
Yes, individual mortgage originators in Virginia are required to hold Mortgage Loan Originator licenses.
What are the educational requirements for a Mortgage Loan Originator license in Virginia?
Virginia requires Mortgage Loan Originators to complete a 20-hour pre-licensing education course and 8 hours of continuing education annually.
Are there any ethical standards that Virginia mortgage companies must adhere to?
Yes, Virginia mortgage companies must adhere to ethical standards in advertising, customer interactions, and loan origination processes.
Can Virginia mortgage companies sell their loan portfolios?
Yes, Virginia mortgage companies can sell loan portfolios to other lenders or investors.
What happens to a borrower’s mortgage if a mortgage company goes out of business in Virginia?
If a mortgage company goes out of business in Virginia, the mortgage may be sold to another company or managed by a third party servicing company.
Is Virginia a good state to start a mortgage company?
Virginia is considered a favorable state for starting a mortgage company due to its strong economy and steady real estate market.
What licenses do I need to start a mortgage company in Virginia?
You will need to obtain a Mortgage Broker License or Mortgage Lender License to operate legally in Virginia.
What is the difference between a Mortgage Broker License and a Mortgage Lender License?
A Mortgage Broker works as a middleman between borrowers and lenders, while a Mortgage Lender funds loans with its own capital.
What are the requirements for a Mortgage Broker License in Virginia?
You will need to have three years of experience in mortgage banking or related field, a surety bond, and pass an examination.
What are the requirements for a Mortgage Lender License in Virginia?
You will need to have a net worth of at least $250,000, a surety bond, and pass an examination.
How long does it take to get a mortgage company license in Virginia?
It typically takes four to six months to obtain a mortgage license in Virginia.
What are the fees associated with getting a mortgage company license in Virginia?
The application fee for a Mortgage Broker License is $700, while the application fee for a Mortgage Lender License is $1,200.
What are the annual renewal fees for a mortgage company license in Virginia?
The renewal fee for a Mortgage Broker License is $545, while the renewal fee for a Mortgage Lender License is $745.
Can I operate my mortgage company from my home in Virginia?
Yes, you can operate a mortgage company from your home in Virginia, as long as you have a physical address for your business and comply with all licensing and registration requirements.
Do I need to have an office location to start a mortgage company in Virginia?
Yes, you must have a physical office address in Virginia to obtain a mortgage license.
Can I have multiple branch locations for my mortgage company in Virginia?
Yes, you can have multiple branch locations for your mortgage company in Virginia, but each location must have its own license.
What kind of records do I need to keep for my mortgage company in Virginia?
You need to maintain detailed records of all loan transactions, including loan applications, loan contracts, and borrower and lender disclosures, for at least three years.
Do I need to register my mortgage company with any other agencies in Virginia?
You need to register your mortgage company with the Virginia Corporation Commission and the Nationwide Multi-State Licensing System & Registry (NMLS).
Is there a minimum net worth requirement for a mortgage company in Virginia?
Yes, there is a minimum net worth requirement of $25,000 for Mortgage Brokers and $250,000 for Mortgage Lenders in Virginia.
How many years of experience do I need to have to start a mortgage broker company in Virginia?
You need to have three years of experience in mortgage banking or related field to start a mortgage broker company in Virginia.
Can I operate as both a mortgage lender and a mortgage broker in Virginia?
Yes, you can operate as both a mortgage lender and a mortgage broker in Virginia, as long as you have separate licenses for each.
Can I hire a loan officer for my mortgage company in Virginia?
Yes, you can hire a loan officer for your mortgage company in Virginia, but they must be licensed with the NMLS and work under your mortgage company license.
What is the surety bond requirement for a mortgage company in Virginia?
The surety bond requirement for a Mortgage Broker is $50,000, while the surety bond requirement for a Mortgage Lender varies based on the company’s loan volume.
How do I obtain a surety bond for my mortgage company in Virginia?
You can obtain a surety bond through a licensed surety provider or insurance company.
What is the annual loan volume requirement for a Mortgage Lender License in Virginia?
The annual loan volume requirement for a Mortgage Lender License varies based on the company’s loan volume for the previous year.
Can I advertise my mortgage company services to residents of other states from Virginia?
Yes, you can advertise your mortgage company services to residents of other states from Virginia, but you must comply with the laws of each state in which you do business.
How often do I need to renew my mortgage company license in Virginia?
You need to renew your mortgage company license annually in Virginia.
Do I need to take continuing education courses to renew my mortgage company license?
Yes, you need to complete at least eight hours of NMLS-approved continuing education courses each year to renew your mortgage company license in Virginia.
Is there a penalty for operating a mortgage company without a license in Virginia?
Yes, operating a mortgage company without a license in Virginia is illegal and can result in fines and criminal charges.
Can I apply for a Mortgage Broker or Mortgage Lender License online in Virginia?
Yes, you can apply for a Mortgage Broker or Mortgage Lender License online through the NMLS website.
How long does it take to get approved for a Mortgage Broker or Lender License in Virginia after applying online?
It typically takes a few weeks to get approved for a Mortgage Broker or Lender License in Virginia after applying online.
Do I need to have a physical office location before applying for a mortgage company license in Virginia?
No, you can apply for a mortgage company license in Virginia before having a physical office location, but you must have a location before your license can be issued.
What is the process of changing the address of my mortgage company’s main office location in Virginia?
You need to notify the Virginia Corporation Commission and the National Mortgage Licensing System of the address change and complete the necessary forms.

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Conclusion

Forming a mortgage company in Virginia 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 Virginia.

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