Looking for a mortgage broker business plan? You're in the right place.
Opening a brokerage means answering the questions a bank, a landlord and a wholesale lender will each ask. How many loans must close before the firm pays for itself? How much cash covers the weeks between an application and a funded loan? What happens to the numbers when rates rise and borrowers stop applying? A generic template won't show what a sensible answer looks like.
This article walks through a complete sample plan for a mortgage brokerage in Seattle, Washington, section by section, so you can see how the pieces fit before you write your own. It covers the executive summary, the SWOT analysis and, in the most detail, the financials.
Here's what you'll be able to do after reading:
- The executive summary: put the whole brokerage on one page, so a lender or partner sees what you are asking for within a minute
- The licensing table: list the licence, bond and fee requirements a lender or regulator will check, and tie each one to a source
- The pipeline and loan economics: work out how many applications a year of closings needs, and what each closed loan leaves after the loan officer is paid
- The start-up budget: size the cash reserve for the gap between opening and the first lender payment, so the account is not empty before the first lender payment
- The marketing plan: see what a new brokerage might spend to produce its first 83 applications, and which channels carry them
- The five-year profit, cash flow and balance sheet: follow how each loan officer hire and each pay rise shows up in the numbers
- The rate-shock case: have an answer ready for the "what if closings fall 20%?" question, with the steps the owner takes in response
If you're setting up a mortgage brokerage, read this before drafting your own. The firm is fictional, so take what fits your business and change the rest.
In this plan
To turn this example into your own mortgage broker business plan, use the mortgage broker business plan template.
Executive Summary
Emerald Jet Home Loans is a Washington mortgage brokerage that opens in Seattle on 1 January 2027. It takes loan applications and places them with wholesale lenders, and it is paid by the lender when a loan closes. Its focus is borrowers whose income is hard to document, mainly the self-employed, and investors buying rental property. Beatrice Matthews, the founder and designated broker, owns 100% of the company.
The business needs $420,000: $340,000 of Beatrice's savings and an $80,000 bank term loan. Of that, $334,000 is held as cash, $28,000 buys equipment and fit-out, and $58,000 pays for licensing, legal work, lender set-up and the launch campaign.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $623,219 | $1,620,400 | $2,245,200 |
| Net income after start-up costs | ($225,527) | $70,882 | $133,319 |
| Closing cash | $154,084 | $192,227 | $301,896 |
The firm closes 53 loans in 2027, about $28.9 million of volume, and 180 in 2029. Two licensed originators work from the first week: Beatrice and a salaried loan officer, Jon Marais. Year 1 is a large loss because a loan takes about six weeks to fund and lender approvals take time, so January and February earn nothing, the first closings land in March and the payroll runs ahead of revenue. Monthly profit before interest, depreciation and tax turns positive in July and stays positive through December. Year 2 is the first profitable year.
Revenue depends on interest rates, and the plan is tested against that. If closings run 20% below plan in every year, the firm delays hiring, drops its second senior officer, cuts marketing and Beatrice's pay, stays in its first office and pays no distributions, and it finishes every year with cash in the bank, although it records losses in Years 1, 2 and 4. A 35% shortfall with the same response is not survivable on this funding: cash goes negative in Year 2.
The offer is narrow: a panel of wholesale lenders that fund bank-statement, 1099 and investor-property loans, a loan officer who explains the documents each lender will accept before the application is made, and one processor who owns the file until it closes.
The Brokerage
Legal name: Emerald Jet Home Loans, LLC, a Washington limited liability company. Owner: Beatrice Matthews, 100%. Premises: 1,400 square feet of leased office space in Seattle. Opening date: 1 January 2027. Stage: pre-launch. The mortgage broker licence application is filed with the Washington Department of Financial Institutions (DFI) through the NMLS, and the plan expects approval before opening. DFI's published FAQ gives no processing time, so that timing is a planning figure. If the licence arrives late, the opening date moves with it.
What the firm is for
Place self-employed borrowers and investors with lenders that will read their documents on the borrower's own terms, and be paid for it by the lender.
Two-year targets
- Close 53 loans in 2027 and 134 in 2028, about $28.9 million and $75.3 million of volume.
- Reach $1,620,400 of revenue in 2028, with a profit after tax of $70,882.
- Hold four loan officers and two processors by the end of 2028, seven people in all.
- Begin principal repayments on the bank loan in 2028 and pay a first owner distribution, $100,000, in 2031.
Four sources of compensation
| Line | How it earns | Year 1 share of revenue |
|---|---|---|
| Purchase loans | Lender-paid compensation, 205 basis points of loan amount | 42% |
| Self-employed loans | Bank-statement and non-QM loans, 230 basis points | 34% |
| Investor loans | Debt-service-coverage (DSCR) loans, 230 basis points | 17% |
| Refinances | Lender-paid compensation, 190 basis points | 7% |
A basis point is one hundredth of a percent, so 205 basis points on a $575,000 loan is $11,788.
Washington oversight
A Washington mortgage broker holds a licence from DFI, applied for through the NMLS. DFI's FAQ gives $1,001 as the main-office application fee, including the NMLS processing fee, and $205 for each branch. It also requires a surety bond and states that Washington sets no net worth requirement. Each loan originator is licensed separately. The firm holds no client funds, funds no loans and does not service them.
Seattle's Home-Loan Market
Where rates stand
Freddie Mac's weekly survey put the average 30-year fixed mortgage rate at 7.40% on 8 October 2026, up from 7.28% the week before and from 6.30% on the same date in 2025. A rise of 1.10 percentage points in a year weighs on both purchase affordability and refinance demand. The plan therefore keeps a modest refinance line, 10% of closings, and expects no recovery in volume from falling rates. If rates fell, refinance and purchase volume would rise, and that upside is left out of the base case.
Loan officers as an occupation
The Bureau of Labor Statistics counted 283,000 loan officer jobs in 2025 and projects 3,100 more by 2035, about 1% growth and slower than average. It reported a median wage of $76,690 in May 2025 across all loan officers, including salaried bank staff. A mortgage loan originator must also hold a licence. The figures say little about the size of the Seattle market. They describe a profession that is growing slowly and is licensed individually, which matters for hiring: a new brokerage recruits against banks and other brokerages for officers who already hold a licence.
How a broker is paid
A broker's compensation comes either from the lender or directly from the borrower. Regulation Z (12 CFR 1026.36) restricts how originators are paid. Compensation may not depend on a loan's terms such as its rate or fees, and an originator paid directly by the borrower may not also be paid by someone else on that loan. The model therefore treats every file as lender-paid, with one compensation rate per loan type.
Who a borrower could use instead
| Alternative | What it offers | Why a borrower picks it | How Emerald Jet differs by design |
|---|---|---|---|
| Bank or credit union | One institution's own loan products | An existing account, sometimes a relationship discount | A panel of lenders, including ones that accept bank statements as income |
| Online direct lender | A digital application with the lender's own loans | Speed and a familiar brand | A named officer and a processor who stay on the file |
| Another independent brokerage | A similar panel model | Long local referral networks | A narrower focus on self-employed and investor loans |
| A lender's retail loan officer | That lender's loans only | Direct access to underwriters | Choice among lenders when one declines |
The table describes categories and how this firm positions itself. It is not a ranking. Individual lenders change their terms often and publish their own, so none is quoted here.
SWOT
| Strengths | Weaknesses |
|---|---|
| A founder with fifteen years of lending and an officer who specialises in self-employed files | Revenue arrives only at closing, so a slow month is a month without income |
| Two producers from the first week, so the pipeline starts quickly | No brand yet and a first-year loss |
| A narrow offer that is easy for referral partners to describe | Reliance on a few wholesale lenders for non-QM and DSCR products |
| Opportunities | Threats |
|---|---|
| Referrals from CPAs and bookkeepers who have self-employed clients | Rate rises that cut purchase and refinance volume |
| Investor borrowers looking for lenders that underwrite property cash flow | Larger lenders competing on price for the same borrowers |
| Refinance volume if rates fall | Officers leaving with their referral relationships |
The Borrowers We Serve
The self-employed buyer
A freelancer, a small-business owner or a contractor whose tax return shows less income than the bank account does. A lender that underwrites from tax returns sees only the return. These borrowers need an officer who can say, before an application, whether a lender will accept twelve or twenty-four months of bank statements, or a profit and loss statement from a CPA.
The investor
An owner who buys one to five rental properties and wants the loan judged on the property's rent against its debt payments (debt service coverage) instead of on personal income. Investor loans are 20% of closings. They pay the same 230 basis points as self-employed loans, on smaller balances.
The ordinary purchase
Households buying a home with a conventional or government-backed loan arrive mainly through real estate agents. They make up 42% of closings and the largest revenue line, and they give the firm volume while the niche lines build.
The refinance
A smaller line in a high-rate market. Most refinances here are cash-out loans for the self-employed and investors, and they are 10% of closings.
What triggers a call
A purchase contract with a short deadline, a lender who has declined a self-employed application, a CPA mentioning that a client wants to buy, or an investor with a property under contract.
What borrowers ask for
A straight answer on whether the loan is possible, a list of documents on the first call, a rate lock they understand and a closing date that holds.
From Referral to Closing
How a file moves
An inquiry becomes a call, the call becomes an application, and the officer then selects a lender and locks a rate. The processor collects documents and orders third-party reports, the lender's underwriter issues conditions, the borrower clears them and the loan closes. The lender pays the firm's compensation after funding. The whole path takes about six weeks in the model, which accounts for January's empty revenue line.
Pull-through and pipeline
The plan has 64% of applications closing. That is a planning figure and not an industry statistic. It sets how many applications each year's marketing and sales effort must produce.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Applications needed | 83 | 209 | 281 | 336 | 391 |
| Loans closed | 53 | 134 | 180 | 215 | 250 |
| Loan volume | $28.9M | $75.3M | $104.1M | $128.1M | $153.4M |
| Revenue per closed loan | $11,759 | $12,093 | $12,473 | $12,845 | $13,225 |
What a closed loan is worth
Every closed loan earns the same revenue, but the firm keeps different amounts depending on who closed it. The figures below use Year 3 loan sizes.
| Per closed loan, Year 3 | Closed by Beatrice | Closed by an officer |
|---|---|---|
| Compensation from the lender | $12,473 | $12,473 |
| Direct costs, clawback allowance and B&O tax | ($630) | ($630) |
| Officer commission (100 basis points, with payroll taxes) | – | ($6,248) |
| Left to cover overheads | $11,843 | $5,596 |
Washington's business and occupation tax, here 1.75% of revenue, is charged on gross receipts, so it falls on each closed loan. Officers earn a $48,000 base and 100 basis points on every loan, the same rate whatever its terms. That is roughly half of the firm's compensation. Experienced producers may ask for more, and a higher payout would cut the margins shown in the financial plan.
A mature loan officer
One officer closing 3.0 loans a month, which is 36 a year, writes about $20.8 million of volume at Year 3 loan sizes.
| Year 3 | Amount |
|---|---|
| Revenue to the firm | $449,040 |
| Officer commission, with payroll taxes | ($224,924) |
| Base salary, with on-costs and pay raises | ($64,672) |
| Direct costs, clawbacks and B&O tax | ($22,677) |
| Contribution before processors, marketing and rent | $136,767 |
The officer's own pay in that year is about $259,000 before the firm's payroll costs.
Production, month by month
Officers close nothing in their first two months, 0.7 loans a month in months three and four, and reach 3.0 a month after a year. Beatrice closes 21 loans in 2027, starting in March, because licensing, lender onboarding and hiring come first. Seven officers are on payroll by Year 5, and each spends a first year ramping up. That ramp is much of the reason revenue grows 160% in Year 2 and 20% in Year 5.
Where the Applications Come From
The Year 1 budget
Marketing in 2027 costs $94,000: $28,000 of launch spend paid from start-up capital and $66,000 of operating spend. Spread over 83 applications, that is about $1,133 per application, or about $1,774 per closed loan, using all 53 closings. The operating spend alone is $1,245 per closing. Operating marketing is 10.6% of Year 1 revenue and 3.9% of Year 5 revenue.
| Channel | Year 1 spend | Applications expected | What it does |
|---|---|---|---|
| Brand, website and launch materials | $14,000 | – | A site with a document checklist for each loan type |
| Launch events for agents and CPAs | $14,000 | – | Introductions to the first referral partners |
| Paid search and social | $28,000 | 21 | Searches such as "bank statement mortgage Seattle" and "DSCR loan Washington" |
| Real estate agent partnerships | $18,000 | 33 | Lunch-and-learns, co-hosted buyer seminars and a fast pre-approval promise |
| CPA and bookkeeper outreach | $8,000 | 15 | A short guide to what lenders accept as income |
| Content and local search | $7,000 | 7 | Guides on bank-statement loans and investor financing |
| Past clients, email and reviews | $5,000 | 7 | Anniversary contact and a review request after every closing |
A further $8,000 under realtor events and closing gifts sits in operating costs, outside the marketing line. These are the plan's estimates for a new brokerage, not benchmarks.
Referral partners and the rules
Federal rules prohibit paying or accepting anything of value for referring settlement-service business (12 CFR 1024.14(b)). Referral partners are therefore not paid for introductions. Joint events and co-branded material are limited to what the firm's compliance counsel approves.
Milestones
- January 2027: licence active, website live, first applications taken.
- March 2027: first two closings.
- July 2027: monthly EBITDA turns positive.
- December 2027: 53 closings for the year and six people on payroll.
Licences, Files and Staff
The office
The firm leases 1,400 square feet in Seattle, at about $40 a square foot a year with services included ($56,000 in Year 1). Officers work a hybrid week and share desks, which is how ten people fit in the space in Year 3. The office has a small conference room for closings that are not remote. In Year 4 the firm moves to about 2,300 square feet.
Systems
A loan origination system, a pricing engine that compares lender rate sheets, a CRM and a secure portal for borrower documents. Software costs $30,000 in Year 1 and $64,000 by Year 5.
Staff and capacity
A processor handles about eight or nine closings in the busiest month, so processors arrive in months 2, 12 and 30. Officers follow the pipeline: Jon from month 1, then hires in months 4, 10, 17, 27, 40 and 52. The compliance and post-closing coordinator in month 36 takes over file audits that outside counsel runs until then. Hires follow revenue, and the downside case shows which are delayed or dropped.
Licences, bond and insurance
| Requirement | What the sources say | How the plan treats it |
|---|---|---|
| Mortgage broker licence | DFI main-office application fee of $1,001, including NMLS processing; $205 per branch; a designated broker files Form MU4 | Filed in Q4 2026; fees sit in the $7,000 licensing use of funds |
| Surety bond | $20,000 for a new applicant. The amount is reset by 31 March each year from the prior year's Washington volume: $20,000 up to $20 million, $40,000 from $20 million to $40 million, $60,000 above $40 million (WAC 208-660-175) | 2027 volume of about $28.9 million sets a $40,000 bond from March 2028, and 2028 volume of $75.3 million a $60,000 bond from March 2029. Premiums are not published and are expected to fall within the $9,000 licensing and renewals line |
| Net worth | DFI states that Washington has no net worth requirement | None modelled. Wholesale lenders set their own approval criteria and these are not modelled |
| Loan originator licence | 22 hours of pre-licensing education, 4 of them on Washington law, a national test and a state test or the uniform state test, a $155 application fee, and an employer sponsor to hold an active licence | Each officer is licensed before starting. Their sponsorship is a hiring step |
| Continuing education | 9 hours a year: 3 federal law, 2 ethics, 2 non-traditional lending, 1 Washington law, 1 elective | Time and fees are inside the licensing and renewals line |
| Errors and omissions and related cover | DFI's FAQ does not list it. Lender agreements may | Budgeted at $10,000 in Year 1 for errors and omissions, cyber, general liability and fidelity cover |
| Business and occupation tax | A gross receipts tax; the service and other class is 1.5% below $1 million of prior-year income and 1.75% from $1 million to $4,999,999 | Modelled at those rates. Whether brokerage income falls in that class needs an accountant's confirmation, and Seattle's own tax is not modelled |
Lenders
The firm applies to wholesale lenders before opening and keeps a panel that includes at least two lenders funding non-QM and DSCR loans. Each lender sets its own approval terms and its own compensation schedule, so approvals are a start-up task, with $9,000 budgeted for set-up and lender fees.
Open items before opening
- Approval timeline. Wholesale lender approvals and the DFI licence set the first closing date. No timeline is published, so the plan expects none before March.
- Repurchase exposure. A broker agreement can carry repurchase or indemnification terms. The plan prices only the 0.8% clawback allowance.
- Officer retention. Officers can leave with their relationships. Non-solicitation and retention terms are a legal-review item, and the plan includes no retention bonus.
- Bank covenants. The bank is expected to require quarterly accounts and may add a liquidity or net worth covenant. The downside case ends Year 1 with thin equity for that reason.
- No warehouse line. The firm does not fund loans, so no warehouse line, pipeline hedge or servicing cost is modelled.
Beatrice and the Team
Beatrice Matthews, founder and designated broker
Beatrice has fifteen years in mortgage lending, the last eight as a producing loan officer at a King County brokerage, where she built a book of self-employed and investor borrowers. She holds a Washington loan originator licence and is the designated broker on the firm's application. Her $210,000 investment is most of her savings. She is leaving to run a smaller firm where she still closes loans herself, about 21 in Year 1 and 24 a year from Year 3.
Jon Marais, loan officer
Jon has nine years as a loan officer specialising in self-employed borrowers. He joins at launch on a $48,000 base plus 100 basis points on his loans. He holds no equity. Beatrice's and Jon's former employers have non-solicitation terms, which a lawyer has reviewed, so neither brings a pipeline. January starts empty and builds from referrals and marketing.
Where the team is thin
Beatrice has not yet run a licensed company, set a compensation plan or hired officers. The plan uses outside counsel for the compensation plan and advertising review ($14,000 of legal work at launch) and adds the compliance coordinator in month 36. Neither Beatrice nor Jon has run a team of more than two.
If Beatrice is out
The licence names her as designated broker, so her absence is the firm's principal key-person risk. Jon would carry the pipeline in the short term. A longer absence would need a change filed with DFI. The model does not price key-person cover.
Outside help
A mortgage compliance consultant is on call for quarterly file audits. A CPA who works with the firm's self-employed borrowers reviews the first-year numbers every quarter.
Ownership and the bank
Beatrice owns 100% of Emerald Jet Home Loans, LLC, which is taxed as a C corporation by election. The bank loan, which could be SBA-backed or conventional, carries her personal guarantee and a lien on equipment and requires quarterly accounts.
Forecast and Funding
One model sits behind every table here: monthly for 2027, yearly for 2028 to 2031. The inputs come first, so each result can be followed back to the input that drives it.
Funding the launch and the pipeline lag
| Use of funds | Amount |
|---|---|
| Laptops, monitors, phones and a secure document scanner | $12,000 |
| Office furniture and fit-out | $16,000 |
| Brokerage licence, NMLS fees, surety bond and loan officer licences | $7,000 |
| Legal: entity, broker agreements, compensation plan and advertising review | $14,000 |
| Loan origination system set-up, lender approvals and compliance manual | $9,000 |
| Launch: brand, website, agent and CPA partner events | $28,000 |
| Cash reserve for the pipeline lag and a rate-driven volume drop | $334,000 |
| Total uses | $420,000 |
| Source of funds | Amount |
|---|---|
| Beatrice Matthews's savings | $340,000 |
| Bank term loan | $80,000 |
| Total sources | $420,000 |
Beatrice puts in $340,000 of her own savings, 81% of the total. A bank lends $80,000 over seven years at 10.5%, interest-only for the first twelve months. The loan could be an SBA-backed or a conventional bank term loan. Its rate, guarantee, collateral and covenants depend on the lender and are set here for the example. The plan has the bank asking for a personal guarantee. Most of the money, $334,000, stays in the bank. A broker earns nothing until a loan funds, January and February have no closings at all because lender approvals and first files take about that long, and the plan expects at least one stretch where rates push closings down. In the base case the lowest month-end cash is about $90,000 in June. The reserve is sized to the downside case and not the base case.
Where the figures come from
- Each closed loan earns lender-paid compensation, set as basis points (hundredths of a percent) of the loan amount: 205 on purchase loans, 190 on refinances and 230 on self-employed and investor loans. Blended, that is about 2.16% of volume, or $11,759 per closed loan in Year 1 and $13,225 in Year 5. Wholesale lenders publish their own schedules to approved brokers. These rates are set for the example and are not quotes from any lender. Under Regulation Z a loan originator who is paid directly by the borrower cannot also take compensation from anyone else on that loan, so the model treats every file as lender-paid.
- Average loan sizes in 2027 are $575,000 for purchases, $470,000 for refinances, $610,000 for self-employed borrowers and $430,000 for investor loans, all rising 3% a year from Year 2. They are illustrative Seattle-area figures, not published medians. Across the mix the average loan is $545,300 in Year 1, which puts 53 closings at about $28.9 million of volume.
- The target mix of closings is 42% purchase, 10% refinance, 28% self-employed and 20% investor. Rounded to whole loans, Year 1 comes out at 22, 5, 15 and 11. The refinance share is kept small on purpose. Freddie Mac's weekly survey put the 30-year fixed rate at 7.40% on 8 October 2026, up from 6.30% a year earlier, and the plan keeps rates near that level. A sustained fall in rates would raise refinance volume. That upside is not modelled.
- The four revenue lines add up to the same loan count in every year: 53, 134, 180, 215 and 250 closings. Production follows people. Nothing closes in January or February while lender approvals finish and the first files move through underwriting. Beatrice closes 1 loan in March, 1.8 a month in April and 2.2 a month from May, or 21 in Year 1, 27 in Year 2 and 24 a year from Year 3 as management takes more of her time. A new loan officer closes nothing in the first two months, 0.7 a month in months three and four, then 1.5, 2.3 and 2.7 in successive stretches and 3.0 a month from the second year onward, or 36 a year. Officers close 32 of the 53 loans in Year 1 and 226 of 250 in Year 5. Closings follow a seasonal pattern that puts June about 20% above the average month and January about 23% below it.
- About 64% of applications close. Year 1 therefore needs about 83 applications for 53 closings, and Year 5 about 391 for 250. A file takes about six weeks from application to funding. Both figures are the plan's own, not industry statistics. As a broker, the firm does not fund loans, hold a warehouse line, hedge a pipeline or service loans, so none of those costs appear.
- Loan officers are paid a base of $48,000 plus 100 basis points of the loan amount on every loan they close, the same rate whatever the loan's rate, product or fees. Regulation Z (12 CFR 1026.36(d)(1)(i)) bars compensation that depends on a loan's terms. The commission is its own line, grossed up 8% for employer payroll taxes. At about half of the firm's compensation, 100 basis points is at the lower end of what experienced producers expect and is a modelling choice, not a market survey. A mature officer closing 36 loans at Year 3 loan sizes writes about $20.8 million and earns about $259,000 in total. The Bureau of Labor Statistics median for all loan officers was $76,690 in May 2025, but that figure includes salaried bank staff and does not describe a commissioned broker.
- Each processor handles a busiest month of 7.0 to 8.5 closings, a ceiling of about nine. Processors join in months 2, 12 and 30. They are paid $68,000, and the compliance and post-closing coordinator $70,000. Payroll adds 27% for payroll taxes, health cover, workers' compensation and a retirement match. Wages in the personnel table are launch rates and 3% annual pay raises are a separate line from Year 2.
- Direct costs are 2.5% of revenue, covering credit reports, verification and e-signature fees on each file. A further 0.8% of revenue is set aside for clawbacks. A lender can recover compensation if a loan is repurchased or repaid soon after closing, and each lender sets its own terms. Both percentages are the plan's own settings, and the plan prices no repurchase losses beyond them.
- Washington business and occupation (B&O) tax is a gross receipts tax. The model charges 1.5% of revenue in Years 1 and 2 and 1.75% from Year 3, the "Service and other activities" rates the Department of Revenue lists for prior-year income below $1 million and for $1 million to $4,999,999. Whether brokerage income falls in that class, which credits apply and what Seattle charges on top are not modelled and need an accountant's confirmation.
- The office is 1,400 square feet at about $40 a square foot a year, full service, then about 2,300 square feet at $43 from Year 4. Officers work a hybrid week and share desks, which is how ten people fit in the first office in Year 3. Rent is not a quoted listing. Software of $30,000 in Year 1 covers a loan origination system, pricing engine, CRM and document portal. Insurance of $10,000 covers errors and omissions, cyber, general liability and fidelity cover. Neither figure comes from a quote.
- The LLC elects to be taxed as a C corporation, which is why federal income tax is charged at 21%, after the Year 1 loss is carried forward. The engine's state rate is set to zero because Washington's business tax is modelled separately as B&O, and an accountant would confirm that nothing else applies. An S corporation election would instead move the tax to Beatrice's own return. A single $100,000 distribution is paid in Year 5, after retained earnings turn positive in Year 4, and the loan runs to term.
Compensation earned by loan type
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Purchase loans: lender-paid compensation | $259,329 | $692,000 | $937,900 | $1,172,100 | $1,393,000 |
| Refinance loans: lender-paid compensation | $44,650 | $128,800 | $170,500 | $204,900 | $251,300 |
| Self-employed (bank-statement and non-QM) loans | $210,450 | $534,700 | $759,100 | $919,900 | $1,105,400 |
| Investor (DSCR) loans | $108,790 | $264,900 | $377,700 | $464,700 | $556,600 |
| Total revenue | $623,219 | $1,620,400 | $2,245,200 | $2,761,600 | $3,306,300 |
| Growth on prior year | – | 160% | 39% | 23% | 20% |
Purchase loans earn the most and make up 42% of revenue in both Year 1 and Year 5. Self-employed loans carry the highest compensation per loan, and at 34% of revenue in Year 1 and 33% in Year 5 they are the firm's second pillar and its niche. Investor loans are 17% in both years, and refinances are 7% and 8%, the line that would swell if rates dropped. Revenue growth is 160% in Year 2. That is higher than the engine's usual 100% test, and it is explained by the start: Year 1 has two empty months, a slow ramp, and only three officers by the end, while Year 2 has the three early officers producing for a full year. Growth then slows to 39%, 23% and 20%.
Month by month, 2027
| Month | Purchase loans: lender-paid compensation | Refinance loans: lender-paid compensation | Self-employed (bank-statement and non-QM) loans | Investor (DSCR) loans | Total revenue | EBITDA |
|---|---|---|---|---|---|---|
| Jan 2027 | $0 | $0 | $0 | $0 | $0 | ($63,507) |
| Feb 2027 | $0 | $0 | $0 | $0 | $0 | ($63,507) |
| Mar 2027 | $11,788 | $0 | $14,030 | $0 | $25,818 | ($38,334) |
| Apr 2027 | $11,788 | $0 | $0 | $9,890 | $21,678 | ($42,371) |
| May 2027 | $11,788 | $8,930 | $28,060 | $9,890 | $58,668 | ($6,305) |
| Jun 2027 | $35,363 | $0 | $14,030 | $9,890 | $59,283 | ($5,706) |
| Jul 2027 | $23,575 | $8,930 | $28,060 | $9,890 | $70,455 | $5,187 |
| Aug 2027 | $35,363 | $8,930 | $28,060 | $9,890 | $82,243 | $16,680 |
| Sep 2027 | $35,363 | $0 | $14,030 | $19,780 | $69,173 | $3,937 |
| Oct 2027 | $35,363 | $8,930 | $28,060 | $9,890 | $82,243 | $16,680 |
| Nov 2027 | $23,575 | $8,930 | $28,060 | $9,890 | $70,455 | $5,187 |
| Dec 2027 | $35,363 | $0 | $28,060 | $19,780 | $83,203 | $17,616 |
January and February have no revenue because no loan has had time to close. The first two closings land in March. Revenue then climbs unevenly, since a single closing is worth between $8,930 and $14,030. EBITDA, profit before interest, depreciation and tax, is negative from January to June and positive from July to December. Costs run at about $64,000 a month at the start, and the loss before July is what the reserve covers. Month-end cash bottoms out in Jun at about $90,000, after allowing for the ten days lenders take to pay.
Producers and support staff
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Founder and designated broker | $120,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Loan officer (self-employed and purchase desk) | $48,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Loan processor | $68,000 | Month 2 | 1 | 1 | 1 | 1 | 1 |
| Loan officer (purchase desk) | $48,000 | Month 4 | 1 | 1 | 1 | 1 | 1 |
| Loan officer (investor desk) | $48,000 | Month 10 | 1 | 1 | 1 | 1 | 1 |
| Second loan processor | $68,000 | Month 12 | 1 | 1 | 1 | 1 | 1 |
| Loan officer (past-client and referral desk) | $48,000 | Month 17 | – | 1 | 1 | 1 | 1 |
| Loan officer (refinance desk) | $48,000 | Month 27 | – | – | 1 | 1 | 1 |
| Third loan processor | $68,000 | Month 30 | – | – | 1 | 1 | 1 |
| Compliance and post-closing coordinator | $70,000 | Month 36 | – | – | 1 | 1 | 1 |
| Second senior loan officer (investor desk) | $48,000 | Month 40 | – | – | – | 1 | 1 |
| Loan officer (purchase desk, east side) | $48,000 | Month 52 | – | – | – | – | 1 |
| Total payroll incl. on-costs | $360,680 | $548,640 | $677,545 | $850,900 | $911,860 |
Jon Marais, a loan officer, and Beatrice are both producing from January, and a processor joins in February to get the first files through. A second officer follows in month 4 and a third in month 10, with a second processor in month 12. A fourth officer arrives in month 17 and a fifth in month 27, a third processor in month 30 and a compliance and post-closing coordinator in month 36. A sixth officer (the second senior officer) follows in month 40 and a seventh in month 52. Beatrice draws $120,000 from the first month, so every profit figure is what is left after her pay. Officer commission is not in the payroll total. It appears as a separate line in the profit and loss, and the base salaries shown here are only the guaranteed part of an officer's pay.
Profit and loss
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $623,219 | $1,620,400 | $2,245,200 | $2,761,600 | $3,306,300 |
| Direct costs (credit reports, e-signature and vendor fees per file) | ($15,580) | ($40,510) | ($56,130) | ($69,040) | ($82,657) |
| Gross profit | $607,639 | $1,579,890 | $2,189,070 | $2,692,560 | $3,223,643 |
| Payroll incl. on-costs | ($360,680) | ($548,640) | ($677,545) | ($850,900) | ($911,860) |
| Rent | ($56,000) | ($57,700) | ($59,400) | ($99,000) | ($102,000) |
| Utilities | ($3,600) | ($3,700) | ($3,800) | ($5,600) | ($5,800) |
| Marketing | ($66,000) | ($84,000) | ($100,000) | ($116,000) | ($128,000) |
| Insurance | ($10,000) | ($12,500) | ($15,500) | ($18,500) | ($21,000) |
| Professional fees | ($12,000) | ($14,000) | ($15,000) | ($16,000) | ($18,000) |
| Software subscriptions | ($30,000) | ($40,000) | ($50,000) | ($58,000) | ($64,000) |
| Loan officer commission (100 bps of loan amount, with payroll taxes) | ($188,500) | ($649,100) | ($974,700) | ($1,229,100) | ($1,498,000) |
| Washington business and occupation tax | ($9,300) | ($24,300) | ($39,300) | ($48,300) | ($57,900) |
| Compensation clawbacks and early-payoff recapture | ($5,000) | ($13,000) | ($18,000) | ($22,100) | ($26,500) |
| Licences, surety bond, NMLS renewals and continuing education | ($9,000) | ($12,000) | ($15,000) | ($17,000) | ($19,000) |
| Realtor partner events and closing gifts | ($8,000) | ($11,000) | ($14,000) | ($16,000) | ($18,000) |
| Phones, supplies and postage | ($4,000) | ($5,000) | ($6,000) | ($7,000) | ($8,000) |
| Equipment replacement and new-hire kit | $0 | ($5,000) | ($5,000) | ($9,000) | ($6,000) |
| Annual pay raises (3% a year) | $0 | ($16,459) | ($41,262) | ($78,901) | ($114,446) |
| EBITDA | ($154,441) | $83,491 | $154,563 | $101,159 | $225,137 |
| Depreciation | ($4,686) | ($4,686) | ($4,686) | ($4,686) | ($4,686) |
| Interest | ($8,400) | ($7,923) | ($6,809) | ($5,573) | ($4,200) |
| Income tax | $0 | $0 | ($9,749) | ($19,089) | ($45,413) |
| Net income before start-up costs | ($167,527) | $70,882 | $133,319 | $71,811 | $170,838 |
| Start-up costs expensed at opening (legal, licensing, launch marketing) | ($58,000) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($225,527) | $70,882 | $133,319 | $71,811 | $170,838 |
Year 1 loses $167,527 before start-up costs and $225,527 after them, with an EBITDA margin of -24.8%. Year 2 is profitable and pays no income tax, because the Year 1 loss is carried forward. EBITDA margin is 5.1% in Year 2 and 6.9% in Year 3, falls to 3.7% in Year 4 when the larger office, a third processor, a second senior officer and compounding pay raises land together, and recovers to 6.8% in Year 5. These margins are thin because officers keep about half of the firm's compensation. Payroll with pay raises is 58% of revenue in Year 1 and 31% in Year 5, but that ratio falls partly because officer commission rises from 30% of revenue to 45% as officers close more of the loans. Counting commission, people cost 88.1%, 74.9%, 75.4%, 78.2% and 76.3% of revenue across the five years.
Cash in and out
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($237,916) | $48,248 | $120,887 | $62,349 | $160,600 |
| Equipment and fit-out | ($28,000) | $0 | $0 | $0 | $0 |
| Funding received | $420,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid | $0 | ($10,105) | ($11,219) | ($12,455) | ($13,827) |
| Owner distributions | $0 | $0 | $0 | $0 | ($100,000) |
| Net change in cash | $154,084 | $38,143 | $109,669 | $49,894 | $46,773 |
| Closing cash | $154,084 | $192,227 | $301,896 | $351,790 | $398,563 |
Operations use $237,916 of cash in Year 1, funded from the opening reserve, and the balance never falls below zero at a year end. Year 4 adds $49,894 of cash, with no distribution. The only distribution, $100,000 in Year 5, is paid once retained earnings have turned positive.
Balance sheet at year end
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $154,084 | $192,227 | $301,896 | $351,790 | $398,563 |
| Accounts receivable | $17,074 | $44,395 | $61,512 | $75,660 | $90,584 |
| Equipment and fit-out (net) | $23,314 | $18,629 | $13,943 | $9,257 | $4,571 |
| Total assets | $194,473 | $255,250 | $377,351 | $436,707 | $493,718 |
| Bank loan | $80,000 | $69,895 | $58,677 | $46,222 | $32,394 |
| Paid-in capital | $340,000 | $340,000 | $340,000 | $340,000 | $340,000 |
| Retained earnings | ($225,527) | ($154,645) | ($21,326) | $50,486 | $121,323 |
| Total liabilities and equity | $194,473 | $255,250 | $377,351 | $436,707 | $493,718 |
Break-even and coverage
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -24.8% | 5.1% | 6.9% | 3.7% | 6.8% |
| Net margin (before start-up costs) | -26.9% | 4.4% | 5.9% | 2.6% | 5.2% |
| Payroll incl. pay raises as share of revenue | 58% | 35% | 32% | 34% | 31% |
| Revenue per full-time equivalent at year end | $103,870 | $231,486 | $224,520 | $251,055 | $275,525 |
| Average monthly revenue | $51,935 | $135,033 | $187,100 | $230,133 | $275,525 |
| Monthly revenue needed to cover operating costs | $65,135 | $127,897 | $173,889 | $221,487 | $256,283 |
| Debt service cover (EBITDA / interest + principal) | -18.4x | 4.6x | 8.6x | 5.6x | 12.5x |
In the last two rows of the table, the firm covers its operating costs when average monthly revenue exceeds the amount needed. Year 1 averages $51,935 against $65,135 needed, and a loss of $154,441 at EBITDA. Year 2 averages $135,033 against $127,897. The margin is narrowest in Year 4, at $230,133 against $221,487. Debt service cover is negative in Year 1 because EBITDA is negative while interest is paid, then 4.6x in Year 2, 8.6x, 5.6x and 12.5x.
Rate shock: closings 20% short
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $498,575 | $1,296,320 | $1,796,160 | $2,209,280 | $2,645,040 |
| Net income before start-up costs | ($204,815) | ($28,227) | $49,995 | ($2,952) | $89,807 |
| Net income after start-up costs | ($262,815) | ($28,227) | $49,995 | ($2,952) | $89,807 |
| Closing cash | $120,211 | $64,709 | $94,478 | $72,438 | $141,165 |
This case takes 20% off revenue in every year. The picture is a stretch of higher rates and fewer closings, with no change in prices. For a rate-driven trade it is a moderate case, not a severe one, and a harsher run is described below. Officer commission, B&O tax and clawbacks fall by the same 20%, since they move with revenue, but salaries and rent do not. Management responds by starting every hire from month 13 six months later, dropping the second senior officer, cutting marketing by 20%, taking a 20% cut to Beatrice's pay, staying in the first office and paying no distributions. Even so, Year 1 loses $262,815 after start-up costs and equity ends the year at $77,185, thin enough that a lender covenant on net worth could trip. The model shows a loss again in Years 2 and 4, the firm only earns $49,995 and $89,807 in Years 3 and 5, and closing cash never falls below $64,709, reached at the end of Year 2. The lowest month-end cash in Year 1 is about $99,000, in July. With none of those steps, the same shortfall would leave closing cash at $76,531 at the end of Year 1 and negative from Year 2 ($58,560 below zero), and equity at $33,505 after Year 1. A harsher 35% shortfall with the same response leaves $41,527 at the end of Year 1 and cash $234,261 below zero a year later, so the reserve covers a 20% shortfall and not a 35% one. A sustained drop of that depth would need new capital or deeper cuts. The model holds revenue at 80% of the base case whatever the hiring dates, which understates how far late hires would limit output.
Sources
- Freddie Mac, Primary Mortgage Market Survey, weekly 30-year fixed average of 7.40% (8 October 2026), 7.28% (1 October 2026) and 6.30% a year earlier.
- Bureau of Labor Statistics, Loan officers, Occupational Outlook Handbook (2025 employment and wage data; mortgage loan originator licensing).
- Washington Department of Financial Institutions, Mortgage broker application FAQs (main-office and branch fees, $20,000 new-applicant bond, no net worth requirement).
- Washington Administrative Code, WAC 208-660-175, Mortgage brokers: surety bond (bond amounts by Washington loan volume).
- Washington Department of Financial Institutions, Loan originator licensing and continuing education.
- Consumer Financial Protection Bureau, Regulation Z, 12 CFR 1026.36 (loan originator compensation) and Regulation X, 12 CFR 1024.14 (prohibited referral fees).
- Washington Department of Revenue, Business and occupation tax classifications and Business and occupation tax (a gross receipts tax).
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