How to Start a Direct Lending Company

by Frank Nagy; Updated September 26, 2017

Direct lending companies use their own funds to make mortgage loans to borrowers. Unlike mortgage brokerage businesses that broker a loan to other lenders, a direct lender can close a mortgage in a person's name, offer to advance funds or make a commitment to advance funds to an applicant for a mortgage. Once a mortgage is closed, the direct lender has the option to service the loan or recoup its investment by selling the mortgage to another investor for profit.

Step 1

Apply for the mortgage lender license in your state where you will be doing business. In Florida, for example, the new lending company is required to complete Form MU1 under the National Mortgage Licensing System (NMLS) and submit it to the Florida Office of Financial Regulation. In addition, the company is required to pay a $500 application fee, $100 processing fee and $100 guaranty fund fee. An FBI background check will be conducted on all the principal owners of the lending company.

Step 2

Submit audited financial statements. Direct lending applicants are required to submit financial statements for the most recent fiscal year, according to generally accepted accounting principles. The audited financial statement must show a net worth of at least $63,000.

Step 3

Start advertising. Once your company has been approved and all the necessary licenses have been acquired, you can start advertising. Place ads in newspapers offering your current mortgage interest rates and lending programs. Design a website with an application page so your customers can apply online. Post your rates on various websites such as and other consumer finance sites.

Step 4

Keep good records. Each state has certain guidelines on how to maintain records of all your lending transactions. Every direct lender must have a transaction log that needs to be current. Enter the details of every transaction that occurs, whether the applicant is funded or not.

About the Author

Frank Nagy started writing articles relating to business finance in 2010. His articles have been published on and Nagy's career in banking and finance began in 1998 when he obtained his mortgage broker license and launched Frank Nagy Financial Services.

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