If you are a mortgage broker or thinking of becoming one, you make your living on a combination of industry expertise and sales acumen. But getting a good deal on a mortgage broker bond requires much more than just those skills.
Why? Bonding companies have their own criteria for determining what rate to give. Understanding those criteria and how you can use them to get the best deal possible requires strategy. So let’s take a look at how you can unlock the secrets of mortgage broker bonds to save money.
Understanding is the First Step to Saving Money
Obtaining a license to become a mortgage broker requires getting a mortgage broker bond. So if you’re already in the industry, you’ve been through this process before. But even those with decades of experience can do some simple things to get a better bond rate when it’s time to renew.
First, know that you’re legally required to get a bond in order to ensure that you will comply with all laws and regulations governing your mortgage broker license. A bonding company provides you with a bond for which you must pay an annual percentage fee, called a premium.
If there’s a claim against you by a customer, the bond is in place to ensure they suffer no damages. Ultimately you will be responsible to pay back the bonding company in full. In order to reduce your premium, you must show your bond provider that you’re responsible and reliable. How exactly should you do this?
1. Find the Right Bonding Agency
It’s important to understand that the surety bonding industry works very differently from traditional lenders in terms of how the bond cost is decided upon. When you’re getting bonded, you’re doing so through a bond agency. That agency doesn’t directly offer the bond; instead, they use your information to gather offers from a variety of surety bond companies before showing you the best options.
This means you need to evaluate the bonding agency differently than you would a commercial lender. You want to find an agency which works with the largest possible number of surety companies, meaning they will be most able to find you the best possible deal. Thus, begin by choosing wisely!
Beyond working with the right agency, you need to think about how you’ll be evaluated.
2. Fix Any Credit Issues Before Applying
Evaluating credit is at the heart of the mortgage business, so this should be a no brainer. But we still have to point this out—your credit is one of the major evaluating factors for determining your bonding rate. Therefore, it’s a good idea to take care of any issues with collections, judgments, or liens before you apply for your bond to make sure you get the best rate possible.
Even if you can’t resolve a credit issue, it’s still possible to get bonded by working with a larger bonding agency. The agency’s connection to more bond providers not only means you’ll get a better rate, but also that you have better chances of getting bonded in spite of bad credit.
3. Show Strong Financial Health
The mortgage industry may be plagued by brokers who get by with inflated or misleading titles, but that won’t work so well for a surety bond. Your bonding company wants to know that you have experience, that your business is profitable, and that you’ve got a history of following the rules.
This tells them you’re far less likely to violate any rules that might lead to a claim on your bond. Confidence in you translates into a better rate on your bond.
The Key is Diversification
Combine all or some of these techniques and you can expect serious savings. You can also feel free to discuss your specific situation with your bonding agency to get other tailored tips on what you can do to reduce your rate. Happy saving!
What has brought your bond costs down in the past? What suggestions would you give to a first time mortgage broker obtaining their license? Let us know what you think in the comments.
Author: Eric Halsey is a historian by training and disposition who’s been interested in US small businesses since working at the House Committee on Small Business in 2006. Coming from a family with a history of working on industry policy, he has a particular interest in the Surety Bonding industry and loves sharing his knowledge for JW Surety Bonds.
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