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How to Write a Business Plan for Your Home Business

If you fail to plan, you plan to fail. Don't handicap your home business by not taking the steps to create a business plan.

Business Plan

A business plan is a written blueprint for your home business. Business plans are essential for getting a business loan, but even if you don't need outside funding, they are a valuable tool to helping you set goals in your home business, understand what you need to do, and anticipate future growth. 

Types of Business Plans

  • Formal business plans : These plans are detailed documents, usually prepared for the primary purpose of securing outside funding for the business.
  • Informal business plans : These plans are used primarily by the business owner as a road map to success. It might be so informal as to be handwritten notes, or a bit more comprehensive typed out plan.

Whether formal or informal, when properly written and maintained, business plans provide a means to help you stay focused on the tasks that build a profitable home business.

Do you need a business plan?

If you intend to secure outside funding for your business, you'll need a formal business plan. 

However, even if you're starting small or have your own resources to fund your business, a business plan isn't required, but it can greatly improve the chances that your home business will succeed. 

The U.S. Bureau of Labor Statistics estimates that as many as 30% of all small businesses fail in the first two years. Those statistics can be very frightening. After all, why would you want to spend time and effort, as well as risk your own money, when there is only one chance in ten your business will survive?

There are several reasons why small and home businesses fail, but proper planning can help overcome them all. A business plan can help you:

  • Get clear on your goals 
  • Develop a deep understanding of your market
  • Organize the day-to-day activities of your home business
  • Understand your current financial situation
  • Make important management and financial decisions about your home business
  • Set a starting point to measure growth

Writing a Business Plan

The answer to this question depends on two key factors.

Is the Business Plan for Internal Use or External Use?

If you're not using the business plan to get a loan or find investors, you can write it yourself. If you're trying to secure outside funding, professionals who write business plans for a living bring a lot to the table even if you only get outside help to review the plan to make sure your bases are properly covered in the document. Additionally, business plans need to be edited and proofread for grammar and good sentence structure. Well-written business plans increase the chances of securing needed outside funding.

How Are Your Writing Skills?

If you're a good writer you can probably write a business plan yourself, at least with some assistance. Software and samples are available to help prepare business plans. Additionally, the SBA is a terrific resource for guiding you through the process. If you haven't already, you'll want to take their online Develop a Business Plan Workshop to get started. While you can easily learn how to write a business plan yourself, you will still benefit from having someone else read through your plan and you may still need outside assistance, such as a CPA to create your financial documents and/or a market research firm to develop statistics about your markets.

Whether you decide to hire someone who writes business plans, write it yourself, or use software, you still need to take an active role in the process. Whoever writes your plan needs accurate information for each section of the document and a clear understanding of your business.

Gathering the information is also of great benefit to you because it helps you understand your business and what you need to do in order to succeed, and it gives you a clearer picture of your competitors and your market.

If the business plan's purpose is primarily for your own use you can follow a  simple home business plan  outline.While general guidelines are available, if the plan is being written primarily to secure outside funding, such as a small business loan, it's not a bad idea to see in advance if the financial institution has any specific requirements it likes to see in its loan applications and business plans. The basic outline of the business plan includes:

  • Executive Summary – A high-level overview of the document that is placed first in the finished document but that needs to be written last.
  • Company Description - A history and description of your company.
  • Products or Services - Information on the products or services you plan to offer and how they compare to your competitors products or services.
  • Market Analysis – A description of your market, your niche, and the demand for your product or service (supported by documentation). The percentage of market share you envision and conclusions of any marketing research data.
  • Marketing and Sales Strategies – How you will promote your business, how you will get your product or service to your customers, the costs for distribution and promotion, and how you will measure the effectiveness of the methods you plan to use.
  • Organization and Management – The legal structure of your business ( sole proprietorship , LLC , C corporation , S corporation , etc.), who your key players are, who is responsible for what and how much they will cost your business.
  • Financial Data – Your balance sheet , a breakeven analysis, an income statement and a statement of cash flows . You'll want to include both historical financial statements and forward-looking financial statements.
  • Funding Request – This is the section when you'll be requesting funding for the business. If you are not seeking outside funds right now, you can leave this section out.
  • Appendix – Contains supporting information, such as resumes, details of market research findings, estimates, and all other documentation required to support what's contained in the body of the business plan.

What to do with the business plan once it's done?

Once you've completed the above information, you need to use your business plan as you organize you daily to-dos and make decisions about your business. Note that your business plan isn't a static document carved in stone. As you build your business, you may find that you need to make adjustments or changes depending on the market, your ability to reach your goals, and changing trends in the marketplace. As a result, it doesn't hurt to review and revise, if necessary, your business plan every six months or so.

Keeping your business plan current offers some important benefits, such as:

  • If you ever need to apply for additional funding through either SBA loan programs or other sources of private funding, up-to-date information will already be available. When it comes time to submitting updated business plans, you'll save time and money.
  • It helps you stay focused the important elements of your business, and avoid getting bogged down in busy work, or shiny objects. 

It can help you identify areas you need to improve in or can expand.

U.S. Bureau of Labor Statistics. " Table 7. Survival of private sector establishments by opening year ." Accessed April 16, 2021.

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Mortgage Broker Business Plan Template

Written by Dave Lavinsky

Mortgage Broker Business Plan

You’ve come to the right place to create your Mortgage Broker business plan.

We have helped over 10,000 entrepreneurs and business owners create business plans and many have used them to start or grow their Mortgage Broker companies.

Below is a template to help you create each section of your Mortgage Broker business plan.

Executive Summary

Business overview.

Davidson Mortgage, located in Tucson, Arizona, is a new mortgage brokerage specializing in residential mortgages. The company will operate in a professional setting, conveniently located next to several banks in the center of the shopping district. We offer a wide range of services to help our clients get a mortgage, including finding loan options, applying for the loans on the clients’ behalf, and completing all the paperwork. We strive to serve our clients with the utmost empathy to ensure they get the best mortgage for their situation.

Davidson Mortgage is headed by Harold Davidson. He is an MBA graduate from Arizona State University with 20 years of experience working in the finance industry. His passion is to help his clients qualify for their dream homes and provide them with a smooth process from start to finish.

Davidson Mortgage will focus on providing superior service to all of its clients to ensure they get the best mortgage possible. Our services include finding loan options, applying for loans on behalf of customers, and completing closing paperwork. Since customer service is our top priority, we will keep in touch with our clients after they have closed on the mortgage. Furthermore, Harold will create webinars, online courses, and other content to educate his clients and the local community on the mortgage lending process.

Customer Focus

Davidson Mortgage will primarily serve homebuyers interested in properties located in the Tucson, Arizona area. Tucson is a growing city with thousands of residents eager to purchase a new home. We expect our clientele to be equal parts first-time home buyers and existing homeowners.

Management Team

Davidson Mortgage is run by Harold Davidson. Harold has been a licensed mortgage broker for the past 20 years, working for several large firms. However, throughout his career, he desired to have a closer connection with his clients as well as have more flexibility to help them get their dream homes. He started this company in order to achieve those goals. In addition to his valuable experience, Harold also holds an MBA from Arizona State University.

Harold is joined by Bethany Peterson. She will serve as the company’s full-time assistant, who, among other things, will manage the company website, coordinate scheduling, and answer basic client questions. Bethany has experience working with C-level executives and has spent significant time as an administrator.

Success Factors

Davidson Mortgage is uniquely qualified to succeed due to the following reasons:

  • Davidson Mortgage will fill a specific market niche in the growing community we are entering. In addition, we have surveyed local realtors and homebuyers and received extremely positive feedback saying that they would consider making use of our services when launched.
  • Our location is in an economically vibrant area where new home sales are on the rise, and turnover in homes and rentals occurs often due to the upward mobility of residents.
  • The management team has a track record of success in the mortgage brokerage business.
  • The local area is currently underserved and has few independent mortgage brokers offering high customer service to homebuyers.

Financial Highlights

Davidson Mortgage is seeking a total funding of $250,000 of debt capital to open its office. The capital will be used for funding capital expenditures and location build-out, hiring initial employees, marketing expenses, and working capital.

Specifically, these funds will be used as follows:

  • Office design/build: $50,000
  • Three months of overhead expenses (payroll, rent, utilities): $100,00
  • Marketing expenses: $50,000
  • Working capital: $50,000

business plan for house loan

Company Overview

Who is davidson mortgage, davidson mortgage history.

After surveying the local customer base and finding a potential office, Harold Davidson incorporated Davidson Mortgage as an S-Corporation on 1/1/2023.

The business is currently being run out of Harold’s home office, but once the lease on Davidson Mortgage’s office location is finalized, all operations will be run from there.

Since incorporation, Davidson Mortgage has achieved the following milestones:

  • Found office space and signed Letter of Intent to lease it
  • Developed the company’s name, logo, and website
  • Hired an interior designer for the decor and furniture layout
  • Determined equipment and fixture requirements

Davidson Mortgage Services

Industry analysis.

Despite the pandemic hurting several industries, the mortgage brokers industry still performed strong and is projected to continue to do so. Last year, U.S. mortgage brokerages brought in revenues of $11.7 billion and employed 47,000 people. There were just over 12,000 businesses in this market.

However, the mortgage broker industry is highly fragmented, with the top two companies accounting for just over 11% of industry revenue. Furthermore, mortgage interest rates are on the rise, as well as housing prices, preventing many people from buying houses and applying for mortgages. These two factors significantly stunt the industry at present.

Despite these challenges, the industry is still projected to increase moderately throughout the rest of the decade. Though larger firms may dominate revenue and clientele, studies and surveys show that clients don’t necessarily favor working with large firms. Providing excellent service and personal touches throughout the process can help small firms succeed in the industry.

Customer Analysis

Demographic profile of target market.

Davidson Mortgage will primarily serve the residents of Tucson, Arizona. The area we serve has a significant population of people who are searching for their first home, as well as families and individuals who need a new home.

The precise demographics for Tucson, Arizona are:

Customer Segmentation

Davidson Mortgage will primarily target the following customer segments:

  • Existing homeowners
  • First-time home buyers

Competitive Analysis

Direct and indirect competitors.

Davidson Mortgage will face competition from other companies with similar business profiles. A description of each competitor company is below.

The Loan Store

Established in 2010, The Loan Store originates, finances, and sells mortgage and non-mortgage lending products throughout the United States. It offers a range of consumer credit products, such as home loan products, home equity loans, and unsecured personal loans, as well as home and personal loan servicing. The company claims to be one of the largest private, independent retail mortgage lenders in the U.S. Its current business channels include direct lending, affinity, branch retail, and servicing.

However, agents working with The Loan Store experience high turnover, resulting in little concern for maintaining ongoing relationships with clients. Also, the agents themselves are mixed in quality, ranging from part-time brokers with little experience or sales records to full-time brokers with long-term experience. There is no systematic company method for passing on knowledge from experienced to inexperienced brokers as all are competing with each other, to a certain extent, for commissions.

Direct Loan Connection

Founded in 2006, Direct Loan Connection (DLC) employs licensed mortgage professionals who have access to multiple lending institutions, including banks, credit unions, and trust companies. This access enables the company to offer a vast array of available mortgage products – ranging from first-time homebuyer programs to financing for the self-employed to financing for those with credit blemishes. In addition, to help homebuyers and homeowners, DLC offers commercial mortgages.

Though they are a local leader in the premium end of the market, they refuse to negotiate their broker’s fees and sometimes lose potential clients because of this. Davidson Mortgage’s fees will be far more reasonable.

Supreme Mortgage

Supreme Mortgage specializes in mortgage brokering and is committed to helping homebuyers, and homeowners get the best mortgage with the lowest interest rate. The brokerage works with more than 40 lenders who compete to provide mortgages and who pay Supreme Mortgage’s fee so that clients receive the service free of charge.

Some reviews of Supreme Mortgage point out the low-quality service offered by brokers, who have little training in customer service. Furthermore, Supreme Mortgage does not attempt to maintain long-term relationships with customers who will eventually purchase another home.

Competitive Advantage

Davidson Mortgage enjoys several advantages over its competitors. These advantages include:

  • Location: Davidson Mortgage’s location is near the center of town, in the shopping district of the city. It is visible from the street, where many residents shop for both day-to-day and luxury items.
  • Client-oriented service: Davidson Mortgage will have a full-time assistant to keep in contact with clients and answer their everyday questions. Harold Davidson realizes the importance of accessibility to his clients and will further keep in touch with his clients through monthly seminars on topics of interest.
  • Management: Harold Davidson has been extremely successful working in the mortgage brokerage sector and will be able to use his previous experience to grant his clients detailed insight into the world of home loans. His unique qualifications will serve customers in a much more sophisticated manner than many of Davidson Mortgage’s competitors.
  • Relationships: Having lived in the community for 25 years, Harold Davidson knows many of the local leaders, newspapers, and other influencers.

Marketing Plan

Davidson Mortgage will use several strategies to promote its name and develop its brand. By using an integrated marketing strategy, Davidson Mortgage will win clients and develop consistent revenue streams.

Brand & Value Proposition

The Davidson Mortgage brand will focus on the company’s unique value proposition:

  • Client-focused residential mortgage brokerage services, where the company’s interests are aligned with the customer
  • Service built on long-term relationships and personal attention
  • Big-firm expertise in a small-firm environment

Promotions Strategy

The promotions strategy for Davidson Mortgage is as follows:

Website/SEO

Davidson Mortgage will invest heavily in developing a professional website that displays all of the features and benefits of working with the mortgage broker. It will also invest heavily in SEO so the brand’s website will appear at the top of search engine results.

Social Media

Davidson Mortgage will invest heavily in a social media advertising campaign. Harold and Bethany will create the company’s social media accounts and invest in ads on all social media platforms. It will use targeted marketing to appeal to the target demographics.

Davidson Mortgage understands that the best promotion comes from satisfied customers. The company will work to partner with local realtors by providing economic or financial incentives for every new client produced. This strategy will increase in effectiveness after the business has already been established.

By offering webinars and courses on topics of interest in the office or other locations, Harold Davidson will encourage residents in the community to become comfortable with the expertise and character of Davidson Mortgage. These webinars will generally be offered free of charge as general promotion and for direct networking.

Davidson Mortgage’s pricing will rely on the standard industry rates in order to be perceived as neither a luxury nor a discount broker. The standard rate for brokering a mortgage is 1-2% of the loan amount. By seeking quality clients and maintaining long-term relationships with them, Davidson Mortgage will fend off pressure to discount their rates, even in down markets.

Operations Plan

The following will be the operations plan for Davidson Mortgage.

Operation Functions:

  • Harold Davidson is the founder and will operate as the President of the company. He will be in charge of all the general operations and executive functions within the company. Furthermore, until he hires additional staff, he will personally help all clients who agree to utilize the company’s services.
  • Harold is assisted by his long-term assistant Bethany Peterson. She will serve as the company’s full-time assistant and will manage the company website, coordinate scheduling, and answer basic client questions. Bethany has experience working with C-level executives and has spent significant time as an administrator.
  • As the business grows and Harold takes on more clients, he will hire other mortgage brokers to assist him.

Milestones:

The following are a series of steps that will lead to the company’s long-term success. Davidson Mortgage expects to achieve the following milestones in the next six months:

3/202X            Finalize lease agreement

4/202X            Design and build out Davidson Mortgage office

5/202X            Hire and train initial staff

6/202X            Kickoff of promotional campaign

7/202X            Reach break-even

8/202X            Reach 25 ongoing clients

Financial Plan

Key revenue & costs.

Davidson Mortgage’s revenues will come primarily from the commissions earned from residential mortgage sales.

The major cost drivers for the company will include employee salaries, lease payments, and marketing expenses.

Funding Requirements and Use of Funds

Key assumptions.

The following outlines the key assumptions required to achieve the revenue and cost numbers in the financials and to pay off the startup business loan.

  • Annual lease: $30,000

Financial Projections

Income statement, balance sheet, cash flow statement, mortgage broker business plan faqs, what is a mortgage broker business plan.

A mortgage broker business plan is a plan to start and/or grow your mortgage broker business. Among other things, it outlines your business concept, identifies your target customers, presents your marketing plan and details your financial projections.

You can easily complete your Mortgage Broker business plan using our Mortgage Broker Business Plan Template here .

What are the Main Types of Mortgage Broker Businesses?

There are a number of different kinds of mortgage broker businesses , some examples include: Retail Mortgage Broker, Business/Corporate Mortgage Broker, or Private Mortgage Brokers.

How Do You Get Funding for Your Mortgage Broker Business Plan?

Mortgage Broker businesses are often funded through small business loans. Personal savings, credit card financing and angel investors are also popular forms of funding.

What are the Steps To Start a Mortgage Broker Business?

Starting a mortgage broker business can be an exciting endeavor. Having a clear roadmap of the steps to start a business will help you stay focused on your goals and get started faster.

1. Develop A Mortgage Broker Business Plan - The first step in starting a business is to create a detailed mortgage broker business plan that outlines all aspects of the venture. This should include potential market size and target customers, the services or products you will offer, pricing strategies and a detailed financial forecast. 

2. Choose Your Legal Structure - It's important to select an appropriate legal entity for your mortgage broker business. This could be a limited liability company (LLC), corporation, partnership, or sole proprietorship. Each type has its own benefits and drawbacks so it’s important to do research and choose wisely so that your mortgage broker business is in compliance with local laws.

3. Register Your Mortgage Broker Business - Once you have chosen a legal structure, the next step is to register your mortgage broker business with the government or state where you’re operating from. This includes obtaining licenses and permits as required by federal, state, and local laws.

4. Identify Financing Options - It’s likely that you’ll need some capital to start your mortgage broker business, so take some time to identify what financing options are available such as bank loans, investor funding, grants, or crowdfunding platforms.

5. Choose a Location - Whether you plan on operating out of a physical location or not, you should always have an idea of where you’ll be based should it become necessary in the future as well as what kind of space would be suitable for your operations.

6. Hire Employees - There are several ways to find qualified employees including job boards like LinkedIn or Indeed as well as hiring agencies if needed – depending on what type of employees you need it might also be more effective to reach out directly through networking events.

7. Acquire Necessary Mortgage Broker Equipment & Supplies - In order to start your mortgage broker business, you'll need to purchase all of the necessary equipment and supplies to run a successful operation.

8. Market & Promote Your Business - Once you have all the necessary pieces in place, it’s time to start promoting and marketing your mortgage broker business. This includes creating a website, utilizing social media platforms like Facebook or Twitter, and having an effective Search Engine Optimization (SEO) strategy. You should also consider traditional marketing techniques such as radio or print advertising. 

Learn more about how to start a successful mortgage broker business:

  • How to Start a Mortgage Broker Business
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Why Do I Need a Business Plan?

Sections of a business plan, the bottom line.

  • Small Business

How to Write a Business Plan for a Loan

How to secure business financing

Matt Webber is an experienced personal finance writer, researcher, and editor. He has published widely on personal finance, marketing, and the impact of technology on contemporary arts and culture.

business plan for house loan

A business plan is a document that explains what a company’s objectives are and how it will achieve them. It contains a road map for the company from a marketing, financial, and operational standpoint. Some business plans are more detailed than others, but they are used by all types of businesses, from large, established companies to small startups.

If you are applying for a business loan , your lender may want to see your business plan. Your plan can prove that you understand your market and your business model and that you are realistic about your goals. Even if you don’t need a business plan to apply for a loan, writing one can improve your chances of securing finance.

Key Takeaways

  • Many lenders will require you to write a business plan to support your loan application.
  • Though every business plan is different, there are a number of sections that appear in every business plan.
  • A good business plan will define your company’s strategic priorities for the coming years and explain how you will try to achieve growth.
  • Lenders will assess your plan against the “five Cs”: character, capacity, capital, conditions, and collateral.

There are many reasons why all businesses should have a business plan . A business plan can improve the way that your company operates, but a well-written plan is also invaluable for attracting investment.

On an operational level, a well-written business plan has several advantages. A good plan will explain how a company is going to develop over time and will lay out the risks and contingencies that it may encounter along the way.

A business plan can act as a valuable strategic guide, reminding executives of their long-term goals amid the chaos of day-to-day business. It also allows businesses to measure their own success—without a plan, it can be difficult to determine whether a business is moving in the right direction.

A business plan is also valuable when it comes to dealing with external organizations. Indeed, banks and venture capital firms often require a viable business plan before considering whether they’ll provide capital to new businesses.

Even if a business is well-established, lenders may want to see a solid business plan before providing financing. Lenders want to reduce their risk, so they want to see that a business has a serious and realistic plan in place to generate income and repay the loan.

Every business is different, and so is every business plan. Nevertheless, most business plans contain a number of generic sections. Common sections are: executive summary, company overview, products and services, market analysis, marketing and sales plan, operational plan, and management team. If you are applying for a loan, you should also include a funding request and financial statements.

Let’s look at each section in more detail.

Executive Summary

The executive summary is a summary of the information in the rest of your business plan, but it’s also where you can create interest in your business.

You should include basic information about your business, including what you do, where you are based, your products, and how long you’ve been in business. You can also mention what inspired you to start your business, your key successes so far, and your growth plans.

Company Overview

In this section, focus on the core strengths of your business, the problem you want to solve, and how you plan to address it.

Here, you should also mention any key advantages that your business has over your competitors, whether this is operating in a new market or a unique approach to an existing one. You should also include key statistics in this section, such as your annual turnover and number of employees.

Products and Services

In this section, provide some details of what you sell. A lender doesn’t need to know all the technical details of your products but will want to see that they are desirable.

You can also include information on how you make your products, or how you provide your services. This information will be useful to a lender if you are looking for financing to grow your business.

Market Analysis

A market analysis is a core section of your business plan. Here, you need to demonstrate that you understand the market you are operating in, and how you are different from your competitors. If you can find statistics on your market, and particularly on how it is projected to grow over the next few years, put them in this section.

Marketing and Sales Plan

Your marketing and sales plan gives details on what kind of new customers you are looking to attract, and how you are going to connect with them. This section should contain your sales goals and link these to marketing or advertising that you are planning.

If you are looking to expand into a new market, or to reach customers that you haven’t before, you should explain the risks and opportunities of doing so.

Operational Plan

This section explains the basic requirements of running your business on a day-to-day basis. Your exact requirements will vary depending on the type of business you run, but be as specific as possible.

If you need to rent office space, for example, you should include the cost in your operational plan. You should also include the cost of staff, equipment, and any raw materials required to run your business.

Management Team

The management team section is one of the most important sections in your business plan if you are applying for a loan. Your lender will want reassurance that you have a skilled, experienced, competent, and reliable senior management team in place.

Even if you have a small team, you should explain what makes each person qualified for their position. If you have a large team, you should include an organizational chart to explain how your team is structured.

Funding Request

If you are applying for a loan, you should add a funding request. This is where you explain how much money you are looking to borrow, and explain in detail how you are going to use it.

The most important part of the funding-request section is to explain how the loan you are asking for would improve the profitability of your business, and therefore allow you to repay your loan.

Financial Statements

Most lenders will also ask you to provide evidence of your business finances as part of your application. Graphs and charts are often a useful addition to this section, because they allow your lender to understand your finances at a glance.

The overall goal of providing financial statements is to show that your business is profitable and stable. Include three to five years of income statements, cash flow statements, and balance sheets. It can also be useful to provide further analysis, as well as projections of how your business will grow in the coming years.

What Do Lenders Look for in a Business Plan?

Lenders want to see that your business is stable, that you understand the market you are operating in, and that you have realistic plans for growth.

Your lender will base their decision on what are known as the “five Cs.” These are:

  • Character : You can stress your good character in your executive summary, company overview, and your management team section.
  • Capacity : This is, essentially, your ability to repay the loan. Your lender will look at your growth plans, your funding request, and your financial statements in order to assess this.
  • Capital : This is the amount of money you already have in your business. The larger and more established your business is, the more likely you are to be approved for finance, so highlight your capital throughout your business plan.
  • Conditions : Conditions refer to market conditions. In your market analysis, you should be able to prove that your business is well-positioned in relation to your target market and competitors.
  • Collateral : Depending on your loan, you may be asked to provide collateral , so you should provide information on the assets you own in your operational plan.

How Long Does It Take to Write a Business Plan?

The length of time it takes to write a business plan depends on your business, but you should take your time to ensure it is thorough and correct. A business plan has advantages beyond applying for a loan, providing a strategic focus for your business.

What Should You Avoid When Writing a Business Plan?

The most common mistake that business owners make when writing a business plan is to be unrealistic about their growth potential. Your lender is likely to spot overly optimistic growth projections, so try to keep it reasonable.

Should I Hire Someone to Write a Business Plan for My Business?

You can hire someone to write a business plan for your business, but it can often be better to write it yourself. You are likely to understand your business better than an external consultant.

Writing a business plan can benefit your business, whether you are applying for a loan or not. A good business plan can help you develop strategic priorities and stick to them. It describes how you are going to grow your business, which can be valuable to lenders, who will want to see that you are able to repay a loan that you are applying for.

U.S. Small Business Administration. “ Write Your Business Plan .”

U.S. Small Business Administration. “ Market Research and Competitive Analysis .”

U.S. Small Business Administration. “ Fund Your Business .”

Navy Federal Credit Union. “ The 5 Cs of Credit .”

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  • Home Equity
  • Home Equity Conversion Mortgage
  • Home Equity Line of Credit
  • Home Improvement
  • House Flipping
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  • Interest Rates
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How to Create a Mortgage Loan Officer Business Plan

mortgage loan officer business plan

Are you a mortgage loan officer looking to create a business plan? We have the steps you need to take for success.

When people ask you how much loan officers make, do you have a hard time coming up with a succinct answer?

Don’t worry! It just means you know your business. There are probably as many total compensation numbers in mortgage lending as there are loan officers.

According to Payscale, the average mortgage loan officer earns about  $47,500 per year in salary  and $36,500 in bonuses and commissions. But the outlying data is what shows you just how varied compensation can be from person to person.

The same Payscale report shows that the base salary of a mortgage loan officer ranges from just above $29,100 to almost $84,000. And that’s not all – recent data shows that the top earners are bringing in more than $131,000 from commissions alone.

To get to that level, you have to know your industry. You have to understand what your customers want, of course, but first and foremost you need to know exactly how you’re going to build your business. And that means developing a solid business plan.

Creating a Mortgage Loan Officer Business Plan in Five Steps

Without a business plan, mortgage loan offices don’t know where they’re going or how they’re going to get there. In such a competitive industry, that’s like running a race with a blindfold on – no matter how fast you run, someone who can see is going to get to the finish line faster. Here’s how to give yourself that edge.

1. Analyze Your Market 

You can’t know how to develop your mortgage loan officer business plan until you  know what the market needs . Before you even start writing your business plan, take some time to research what’s going on in your market. For the area you serve, find out: 

  • The  average value of homes  
  • Median household income 
  • Home purchase and sales trends 
  • Property valuation forecasts 
  • Homeownership rates  
  • Housing vacancies    

This information will help you to understand who you’re serving and what they need. Your business plan will be different if your area has a median income of $50,000 than if your average buyer is earning six figures a year. Your sales goals may change if you learn that homeownership rates in your area are declining. 

Once you have as much information as you can gather, you can start to develop actionable objectives.

2. State Your Business Objectives and Goals

The real estate market is notoriously uncertain. Pair that with an “it depends” business strategy and you’ll have a difficult time creating a mortgage loan officer business plan.

Look at the information you have and consider what’s realistic for your market. Where do you want your revenue levels to be in five years? In one year?  Take a look at some examples  of mortgage business plans to get an idea of the  objectives that others in your field are pursuing .    

Next, decide if you want to add any milestones or short-term goals. For example, if you plan to add a second office within five years, will you need to hit a certain revenue level by the three-year mark?

3. Develop a Marketing and Public Relations Strategy

Identify the tools that you’ll use to pursue your goals for your mortgage loan officer business plan. Make sure to diversify and take advantage of digital marketing strategies as well as good old-fashioned networking. 

Schedule your blog posts, then go out to a Chamber of Commerce event. Buy ad space on a real estate website, but don’t forget to talk to your neighbors and find out who might be buying or selling.

It’s particularly important to keep your digital content up to date. Networking is networking in any age, but online trends change quickly.  In 2019, for example :

  • Infographics offer a 40 percent engagement rate
  • Facebook Live videos have twice the engagement of non-live options
  • The ROI of emailing relevant content is approximately $38 for every dollar spent
  • Promoted social media ads are expected to generate $17 billion

Just make sure that you create time in your day to get those messages and posts out into the world!

4. Develop a Referral Network

Your networking strategy should involve fellow professionals as well as people in the community. Join professional organizations, like the  National Association of Mortgage Brokers  or the  Mortgage Bankers Association . 

A mortgage loan officer business plan should include making connections with people who aren’t directly involved in mortgage lending but who work with people who need loans.  Reach out to local :

  • Accountants 
  • Appraisers 
  • Real estate attorneys 
  • Listing agents

Make sure that your referral strategy includes organizations that you can send clients to as well as vice versa. For example, at some point, you will probably have a client that needs a second mortgage or home equity line of credit but doesn’t qualify. More than 20 percent of people seeking this kind of funding can’t get approved. 

5. Keep Tracking Your Progress!

Your mortgage loan officer business plan objectives should be specific enough that you can track your progress as you go. The best way to do this is with  key performance indicators , or KPIs, which are data-based metrics of a business’s momentum.   

To help you evaluate the success of your business plans, your KPIs need to be:    

  • Based on numerical data
  • Presented in the context of performance goals 
  • Relevant to current company processes 
  • Useable to drive change as necessary

KPIs that are  particularly useful to loan officers  include: 

  • Application conversion rate: the ratio of funded loans to applications in a certain time frame 
  • Average origination value per loan: revenue earned from each loan
  • Cost per loan originated: how much you spend on average to secure each loan agreement

Key Takeaways

If you don’t know where you’re headed with your mortgage loan officer business plan, how will you know when you’re there?  To know your destination as well as your path, you need a solid business plan with specific and actionable steps.

Talk to a financial advisor and start developing a plan today. You’ll thank yourself when you reach your first goal!

Ready to Make Your Equity Work For You?

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How to Write a Business Plan, Step by Step

Rosalie Murphy

Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money .

What is a business plan?

1. write an executive summary, 2. describe your company, 3. state your business goals, 4. describe your products and services, 5. do your market research, 6. outline your marketing and sales plan, 7. perform a business financial analysis, 8. make financial projections, 9. summarize how your company operates, 10. add any additional information to an appendix, business plan tips and resources.

A business plan outlines your business’s financial goals and explains how you’ll achieve them over the next three to five years. Here’s a step-by-step guide to writing a business plan that will offer a strong, detailed road map for your business.

Bizee

A business plan is a document that explains what your business does, how it makes money and who its customers are. Internally, writing a business plan should help you clarify your vision and organize your operations. Externally, you can share it with potential lenders and investors to show them you’re on the right track.

Business plans are living documents; it’s OK for them to change over time. Startups may update their business plans often as they figure out who their customers are and what products and services fit them best. Mature companies might only revisit their business plan every few years. Regardless of your business’s age, brush up this document before you apply for a business loan .

» Need help writing? Learn about the best business plan software .

This is your elevator pitch. It should include a mission statement, a brief description of the products or services your business offers and a broad summary of your financial growth plans.

Though the executive summary is the first thing your investors will read, it can be easier to write it last. That way, you can highlight information you’ve identified while writing other sections that go into more detail.

» MORE: How to write an executive summary in 6 steps

Next up is your company description. This should contain basic information like:

Your business’s registered name.

Address of your business location .

Names of key people in the business. Make sure to highlight unique skills or technical expertise among members of your team.

Your company description should also define your business structure — such as a sole proprietorship, partnership or corporation — and include the percent ownership that each owner has and the extent of each owner’s involvement in the company.

Lastly, write a little about the history of your company and the nature of your business now. This prepares the reader to learn about your goals in the next section.

» MORE: How to write a company overview for a business plan

business plan for house loan

The third part of a business plan is an objective statement. This section spells out what you’d like to accomplish, both in the near term and over the coming years.

If you’re looking for a business loan or outside investment, you can use this section to explain how the financing will help your business grow and how you plan to achieve those growth targets. The key is to provide a clear explanation of the opportunity your business presents to the lender.

For example, if your business is launching a second product line, you might explain how the loan will help your company launch that new product and how much you think sales will increase over the next three years as a result.

» MORE: How to write a successful business plan for a loan

In this section, go into detail about the products or services you offer or plan to offer.

You should include the following:

An explanation of how your product or service works.

The pricing model for your product or service.

The typical customers you serve.

Your supply chain and order fulfillment strategy.

You can also discuss current or pending trademarks and patents associated with your product or service.

Lenders and investors will want to know what sets your product apart from your competition. In your market analysis section , explain who your competitors are. Discuss what they do well, and point out what you can do better. If you’re serving a different or underserved market, explain that.

Here, you can address how you plan to persuade customers to buy your products or services, or how you will develop customer loyalty that will lead to repeat business.

Include details about your sales and distribution strategies, including the costs involved in selling each product .

» MORE: R e a d our complete guide to small business marketing

If you’re a startup, you may not have much information on your business financials yet. However, if you’re an existing business, you’ll want to include income or profit-and-loss statements, a balance sheet that lists your assets and debts, and a cash flow statement that shows how cash comes into and goes out of the company.

Accounting software may be able to generate these reports for you. It may also help you calculate metrics such as:

Net profit margin: the percentage of revenue you keep as net income.

Current ratio: the measurement of your liquidity and ability to repay debts.

Accounts receivable turnover ratio: a measurement of how frequently you collect on receivables per year.

This is a great place to include charts and graphs that make it easy for those reading your plan to understand the financial health of your business.

This is a critical part of your business plan if you’re seeking financing or investors. It outlines how your business will generate enough profit to repay the loan or how you will earn a decent return for investors.

Here, you’ll provide your business’s monthly or quarterly sales, expenses and profit estimates over at least a three-year period — with the future numbers assuming you’ve obtained a new loan.

Accuracy is key, so carefully analyze your past financial statements before giving projections. Your goals may be aggressive, but they should also be realistic.

NerdWallet’s picks for setting up your business finances:

The best business checking accounts .

The best business credit cards .

The best accounting software .

Before the end of your business plan, summarize how your business is structured and outline each team’s responsibilities. This will help your readers understand who performs each of the functions you’ve described above — making and selling your products or services — and how much each of those functions cost.

If any of your employees have exceptional skills, you may want to include their resumes to help explain the competitive advantage they give you.

Finally, attach any supporting information or additional materials that you couldn’t fit in elsewhere. That might include:

Licenses and permits.

Equipment leases.

Bank statements.

Details of your personal and business credit history, if you’re seeking financing.

If the appendix is long, you may want to consider adding a table of contents at the beginning of this section.

How much do you need?

with Fundera by NerdWallet

We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

Here are some tips to write a detailed, convincing business plan:

Avoid over-optimism: If you’re applying for a business bank loan or professional investment, someone will be reading your business plan closely. Providing unreasonable sales estimates can hurt your chances of approval.

Proofread: Spelling, punctuation and grammatical errors can jump off the page and turn off lenders and prospective investors. If writing and editing aren't your strong suit, you may want to hire a professional business plan writer, copy editor or proofreader.

Use free resources: SCORE is a nonprofit association that offers a large network of volunteer business mentors and experts who can help you write or edit your business plan. The U.S. Small Business Administration’s Small Business Development Centers , which provide free business consulting and help with business plan development, can also be a resource.

On a similar note...

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How To Write a Business Plan for Home Loan Company in 9 Steps: Checklist

By alex ryzhkov, resources on home loan company.

  • Financial Model
  • Business Plan
  • Value Proposition
  • One-Page Business Plan

Are you interested in starting a home loan company? With the growing demand for home loans in the US, it's a lucrative business opportunity. In this blog post, we will guide you through the process of writing a business plan for your home loan company in 9 simple steps. Whether you are a seasoned entrepreneur or just starting out, this checklist will help you set a strong foundation for your business.

But first, let's take a look at some industry statistics. The home loan industry in the US has experienced significant growth in recent years. According to data from the Mortgage Bankers Association, the total value of mortgage originations reached $3.83 trillion in 2020, a 67% increase compared to the previous year. This growth is expected to continue as the housing market remains strong and more people seek financing for their dream homes.

Now that you know the potential of the home loan industry, let's dive into the steps of writing a comprehensive business plan for your home loan company. Conducting market research will help you understand the current market conditions, trends, and customer needs. Defining your target audience and customer profiles will enable you to tailor your services to meet their specific needs and preferences.

Next, it's crucial to analyze the existing competition to identify what sets your home loan company apart. This will allow you to identify your unique selling proposition and develop strategies to differentiate yourself from competitors.

Once you have a clear understanding of the market and competition, it's time to decide on the legal structure of your company. Consulting with legal professionals will help you choose the right structure that ensures legal compliance and protects your interests.

A comprehensive financial plan is essential for securing funding and managing your business operations effectively. This includes projections for revenue, expenses, and profitability. You'll also need to determine funding sources to finance your home loan company and support its growth.

A strong marketing and branding strategy will help you attract and retain customers. This includes defining your brand identity, creating effective marketing campaigns, and utilizing various channels to reach your target audience.

Last but not least, identifying key personnel and their roles is crucial for the smooth operation of your home loan company. Determine the necessary positions and responsibilities to build a capable team that can provide excellent customer service and manage the complexities of the lending process.

By following these 9 steps, you will be well-prepared to start and grow your home loan company in the US. It's an exciting journey that offers incredible opportunities in a thriving industry.

Conduct Market Research

Conducting thorough market research is a crucial first step in developing a business plan for a home loan company. This process involves gathering and analyzing information about the industry, target market, and potential customers. By understanding the market dynamics and trends, you can make informed decisions that will contribute to the success of your business.

During the market research phase, it is important to identify and analyze your target audience and customer profiles . Determine who your potential customers are, such as first-time homebuyers, real estate investors, or individuals looking to refinance their mortgages. This will help you tailor your products and services to meet their specific needs and preferences.

Furthermore, it is essential to analyze existing competition in the home loan market. Identify the key players in the industry, their strengths and weaknesses, and the strategies they employ. This will enable you to differentiate your business and develop a unique value proposition that sets you apart from the competition.

Market research is also an opportunity to identify your unique selling proposition (USP) . Determine what sets your home loan company apart from others. Whether it's offering personalized customer service, competitive interest rates, or innovative loan products, understanding your USP will assist you in positioning your business effectively and attracting customers.

Tips for conducting market research:

  • Utilize online resources, industry reports, and government data to gather market information.
  • Consider conducting surveys or interviews with potential customers to gain insights into their needs and preferences.
  • Stay updated on industry trends and changes in regulations that may impact the home loan market.
  • Attend industry conferences and networking events to connect with professionals and gain industry knowledge.

By conducting thorough market research, you will be equipped with valuable information and insights that will guide you in making informed decisions throughout the business planning process. This will ultimately contribute to the success and sustainability of your home loan company.

Define Target Audience And Customer Profiles

Defining your target audience and customer profiles is a crucial step in creating a successful business plan for a home loan company. This enables you to understand the specific needs, preferences, and demographics of your potential customers, allowing you to tailor your services and marketing efforts to effectively reach them.

When defining your target audience, consider factors such as age, income level, location, and homeownership status. Determine who would be most likely to seek a home loan and identify any specific characteristics or behaviors that may indicate a higher likelihood of needing your services.

  • Research your market: To accurately define your target audience, it is essential to conduct thorough market research. This includes studying demographic data, analyzing buying patterns, and identifying current trends in the home loan industry.
  • Create customer profiles: Once you have gathered the necessary data, create customer profiles that represent your target audience segments. These profiles should include detailed information such as age, occupation, income, financial goals, and any other relevant information that can help you understand their motivations and needs.
  • Consider conducting surveys or interviews with potential customers to gather additional insights and validate your assumptions about their needs.
  • Look for niche markets within the home loan industry that may have unique needs or requirements. Tailoring your services to these specific segments can help you differentiate yourself from competitors.
  • Regularly revisit and update your target audience and customer profiles as your business grows and evolves. Consumer preferences and market dynamics can change over time, and it's important to stay adaptable.

By clearly defining your target audience and customer profiles, you can develop more targeted marketing strategies, refine your product offerings, and ultimately increase your chances of success in the highly competitive home loan industry.

Analyze Existing Competition

When starting a home loan company, it is vital to analyze the existing competition in the market. By understanding your competitors, you can identify their strengths and weaknesses, and use that information to position your company for success. Here are some key steps to help you analyze the competition:

  • Identify the key competitors: Begin by researching and identifying the main players in the home loan industry. Look for companies that cater to a similar target audience and operate in the same geographical region as your planned business.
  • Assess their offerings: Review the different types of loans and services provided by your competitors. Take note of their interest rates, repayment terms, loan amounts, and any unique features they offer. Identify the aspects that make them stand out.
  • Evaluate their customer experience: Look into their online presence, user interface, and customer reviews to gauge their level of customer satisfaction. Pay attention to their communication channels and strategies for resolving customer queries and concerns.
  • Analyze their pricing strategies: Compare the interest rates, fees, and closing costs charged by your competitors. Determine how they structure and present their pricing to attract borrowers and remain competitive.
  • Study their marketing tactics: Examine the marketing and advertising efforts of your competitors. Analyze their digital presence, social media engagement, and overall branding strategy. This will give you insights into their market positioning and target audience appeal.
  • Consider attending industry conferences or networking events to learn more about your competitors and gain valuable insights.
  • Stay updated with industry news and developments to understand how your competitors might evolve their strategies.
  • Don't solely focus on large, national competitors – also investigate local or regional players who may have unique market advantages.
  • Utilize online tools and resources, such as industry reports and market analysis, to gather comprehensive information on your competitors.

By thoroughly analyzing your competition, you can identify areas where you can differentiate your home loan company and attract prospective borrowers. This knowledge will help you craft a strategy to deliver a superior customer experience and build a strong competitive advantage in the market.

Identify Unique Selling Proposition

In order to differentiate your home loan company from the competition and attract customers, it is crucial to identify your unique selling proposition. This is what sets your company apart and gives it a competitive edge in the market.

To identify your unique selling proposition, consider the following:

  • Assess your target audience: Understand the needs, preferences, and pain points of your target audience. What are they looking for in a home loan company? What problems or challenges do they face when seeking a loan?
  • Evaluate your competition: Study your competitors to identify their strengths and weaknesses. This will help you find gaps in the market that you can leverage to differentiate your company.
  • Highlight your expertise: Identify your company's unique skills, knowledge, or experience in the industry. What specific expertise do you bring to the table that others may not have?
  • Emphasize your customer service: Provide exceptional customer service by offering personalized assistance, prompt communication, and transparency throughout the loan process.
  • Offer competitive interest rates: Determine how you can offer competitive interest rates without compromising your company's profitability. Find creative ways to manage risk and adjust rates accordingly.
  • Focus on technology: Leverage technology to streamline processes and make it easier for customers to apply for loans, track their progress, and communicate with your company.
  • Provide additional services: Consider offering additional services such as credit counseling, financial planning, or mortgage refinancing to add value for your customers.

Tips for identifying your unique selling proposition:

  • Conduct surveys or interviews with potential customers to gather insights into their preferences and pain points.
  • Stay up-to-date with industry trends and evolving customer needs to ensure your unique selling proposition remains relevant.
  • Regularly evaluate and refine your unique selling proposition based on customer feedback and market dynamics.
  • Communicate your unique selling proposition clearly and consistently through your marketing materials, website, and customer interactions.

Determine The Legal Structure Of The Company

When starting a home loan company, it is essential to determine the legal structure of the business. The legal structure you choose will have a significant impact on various aspects of your company, including liability, taxes, and governance. Here are some important considerations when deciding on the legal structure:

  • Research and understand different legal structures: Before making a decision, thoroughly research and understand the various legal structures available for a home loan company. Common options include sole proprietorship, partnership, limited liability company (LLC), and corporation. Each structure has its own advantages and disadvantages, so take the time to understand which one aligns best with your business goals and needs.
  • Evaluate liability protection: One of the key points to consider when determining the legal structure is the level of liability protection you require. For example, a sole proprietorship offers no separation between personal and business liabilities, while an LLC or corporation provides limited liability protection, shielding personal assets from business debts and obligations.
  • Consider tax implications: Another critical factor to consider is the tax implications of the different legal structures. Sole proprietorships and partnerships typically have pass-through taxation, where the income is reported on the owner's personal tax return. On the other hand, corporations may be subject to double taxation, with the company and individual shareholders both being taxed on the earnings.
  • Look into governance and management: The legal structure you choose will also determine how your company is governed and managed. For example, a partnership allows for shared decision-making and responsibilities among partners, while a corporation has a more formal structure with directors and officers managing the business.
  • Consult with a business attorney or legal professional who specializes in corporate law to ensure you fully understand the legal implications of each structure.
  • Consider your long-term goals for the business and how the legal structure may support or hinder those goals.
  • Take into account the potential scalability and growth of your home loan company when choosing a legal structure.

By carefully considering and selecting the appropriate legal structure, you can establish a solid foundation for your home loan company and ensure compliance with legal requirements. It is recommended to seek professional guidance to ensure that you fully understand the legal implications and make an informed decision that aligns with your business objectives.

Develop A Comprehensive Financial Plan

A critical step in starting a home loan company is developing a comprehensive financial plan. This plan will outline your company's financial goals, projections, and strategies for success. It is essential to create a detailed and realistic plan to ensure the financial stability and profitability of your business.

When developing your financial plan, consider the following key components:

  • Profit and Loss Statement: This statement will project your company's revenue, expenses, and estimated profit over a specific period, usually one year. Include all income sources and expense categories to get an accurate picture of your financial situation.
  • Cash Flow Statement: A cash flow statement outlines the inflows and outflows of cash within your business. It tracks the movement of money and helps you identify potential liquidity issues or cash shortages. It is crucial to maintain a positive cash flow to meet your financial obligations.
  • Balance Sheet: A balance sheet provides a snapshot of your company's financial health at a specific point in time. It shows your assets, liabilities, and equity and helps measure your company's net worth. Regularly updating your balance sheet will enable you to track your financial progress.

Tips for Developing a Comprehensive Financial Plan:

  • Be Realistic: When projecting revenue and expenses, be conservative and ensure they are based on accurate market research and industry benchmarks.
  • Consider Different Scenarios: Anticipate potential risks and changes in market conditions. Develop contingency plans to address these scenarios and ensure the financial stability of your business.
  • Seek Professional Advice: Consulting with a financial advisor or accountant can provide valuable insights and guidance in developing your financial plan. They can help identify potential pitfalls and recommend strategies for success.
  • Regularly Monitor and Review: Continuously monitor and review your financial plan to track your progress and make necessary adjustments. Include key performance indicators to gauge your company's financial performance over time.

By developing a comprehensive financial plan, you will have a clear roadmap for achieving your company's financial goals. It will also demonstrate to potential investors or lenders that you have thoroughly considered the financial aspects of your business, increasing your chances of securing funding and support.

Determine Funding Sources

One of the crucial steps in writing a business plan for a home loan company is determining the funding sources. This step will help you identify how you will secure the necessary capital to start and grow your business. Here are some important points to consider:

  • Investors: Look for potential investors who are interested in the home loan industry. These investors can provide you with the initial capital you need in exchange for equity in your company.
  • Bank Loans: Approach banks and financial institutions to explore the possibility of obtaining loans to finance your home loan company. Be prepared to present a solid business plan and financial projections to demonstrate your ability to repay the loan.
  • Personal Savings: Consider using your own personal savings as a funding source for your home loan company. This can demonstrate your commitment to the business and may make it easier to attract additional funding.
  • Government Grants and Programs: Research government grants and programs that are available to support businesses in the home loan industry. These grants can provide financial assistance or other resources to help you launch and grow your company.
  • Crowdfunding: Explore the option of crowdfunding, where you can raise capital by reaching out to a large number of people who are interested in supporting your business idea.
  • Consider diversifying your funding sources to reduce risk and increase the chances of obtaining the necessary capital.
  • Ensure you have a clear understanding of the terms and conditions associated with each funding source, including repayment plans and potential equity implications.
  • Prepare a compelling pitch to present to potential investors or lenders to increase your chances of securing funding.

Determining the funding sources for your home loan company is a critical step that can impact the success of your business. Take the time to explore your options, evaluate the potential risks and rewards, and make informed decisions that align with your long-term goals.

Create A Marketing And Branding Strategy

Creating a strong marketing and branding strategy is crucial for the success of your home loan company. It will help you effectively communicate your value proposition to potential borrowers, differentiate yourself from competitors, and build a trusted brand in the market. Here are some important steps to follow:

  • Define your target market: Clearly identify the segment of borrowers you want to target. Consider factors such as age, income, geographic location, and specific needs that your home loan company can fulfill.
  • Craft your brand identity: Develop a unique and compelling brand identity that resonates with your target audience. This includes your company name, logo, tagline, and messaging. Ensure that your brand reflects the values and benefits you offer to borrowers.
  • Establish your online presence: In today's digital age, having a strong online presence is essential. Create a professional website that is user-friendly and showcases your services. Develop a content strategy to provide valuable information to borrowers and improve your search engine visibility through SEO techniques.
  • Utilize social media: Leverage social media platforms to engage with your target audience and build relationships. Develop a content calendar to regularly share informative and engaging posts related to home loans, property investment, and personal finance. Respond to comments and inquiries promptly to build trust and credibility.
  • Build partnerships: Collaborate with real estate agents, financial advisors, and other professionals in the industry to expand your reach. Explore opportunities for joint marketing efforts and referral programs to mutually benefit from each other's network and expertise.
  • Engage in community initiatives: Demonstrate your commitment to the community by participating in local events, sponsoring relevant causes, or offering educational workshops on home financing. This helps create a positive brand image and fosters trust among potential borrowers.
  • Monitor and evaluate: Continuously track the effectiveness of your marketing and branding efforts. Analyze metrics such as website traffic, social media engagement, and conversion rates. Make necessary adjustments to your strategy based on the data to optimize your results.
  • Research your target audience thoroughly to understand their needs, preferences, and pain points. This will help you tailor your marketing messages and offer relevant solutions.
  • Consistency is key. Ensure that your branding elements are consistent across all communication channels to create a cohesive and memorable brand experience.
  • Consider partnering with influencers or industry experts to amplify your reach and credibility.
  • Monitor industry trends and competitors' marketing strategies to stay ahead of the game and continuously improve your own approach.

Identify Key Personnel And Their Roles

When starting a home loan company, identifying key personnel and determining their roles within the organization is crucial for its success. Each individual brings unique skills and expertise that contribute to the smooth operation and growth of the business. Here are some important positions to consider:

  • Founder/CEO: The founder/CEO is responsible for the overall vision, strategy, and direction of the home loan company. They make major decisions, set goals, and drive the company's growth.
  • Operations Manager: The operations manager oversees the day-to-day activities of the company. This includes managing loan processing, customer service, and ensuring compliance with regulations.
  • Loan Officer: Loan officers are the primary point of contact for borrowers. They analyze loan applications, assess the creditworthiness of borrowers, and guide them through the loan process.
  • Underwriter: Underwriters evaluate loan applications to determine the level of risk involved and whether to approve or deny loans. They assess financial documents, credit history, and property appraisals.
  • Marketing Manager: The marketing manager develops and executes marketing strategies to attract potential borrowers. They create advertising campaigns, manage social media presence, and monitor market trends.
  • Finance Manager: The finance manager is responsible for managing the financial aspects of the home loan company. They oversee budgeting, financial reporting, and ensure compliance with accounting standards.
  • Legal Counsel: Legal counsel plays a crucial role in ensuring compliance with laws and regulations. They draft and review contracts, provide legal advice, and handle any legal disputes that may arise.
  • Customer Service Representatives: Customer service representatives handle inquiries, resolve issues, and provide support to borrowers. They assist with loan applications, answer questions, and ensure a positive customer experience.

Tips for Identifying Key Personnel:

  • Consider the specific needs and requirements of your home loan company when determining key personnel roles.
  • Seek individuals with relevant experience in the mortgage industry, finance, marketing, and legal fields.
  • Ensure that key personnel have strong communication, problem-solving, and decision-making skills.
  • Take into account the size and growth potential of your company when determining the number of personnel needed.
  • Consider outsourcing certain roles, such as accounting or legal counsel, if necessary.
  • Continuously evaluate and reassess the roles of key personnel as the business evolves and expands.

By identifying key personnel and defining their roles within your home loan company, you will establish a strong foundation for achieving your business goals. Each team member will contribute their expertise to ensure efficient operations, excellent customer service, and overall success.

Writing a business plan for a home loan company is an essential step in laying the foundation for a successful venture. By following the nine steps outlined in this checklist, you can create a comprehensive and strategic plan that will help you navigate the competitive market and attract potential customers. Conducting thorough market research, defining your target audience, analyzing your competition, and identifying your unique selling proposition are crucial in setting your business apart from others. Additionally, determining the legal structure, developing a financial plan, and identifying funding sources are key elements in ensuring the financial stability and sustainability of your company.

Creating a marketing and branding strategy is essential for promoting your services and distinguishing your company in the marketplace. Lastly, identifying key personnel and establishing their roles will ensure that your organization is equipped with the right talent to drive your business forward. By following these steps and tailoring them to your specific home loan company, you can set yourself up for success in the competitive home loan industry.

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Take out home equity to invest in your business idea

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Launching your own business is exciting, but funding it can be difficult, especially for a first-time entrepreneur. Here’s where being a homeowner can help.

If you own a substantial amount of your home outright (no longer mortgaged, that is), there are a variety of ways to get funds to kickstart your business. Cash-out refinances, home equity loans, lines of credit and equity sharing agreements are all ways to access cash from your home.

However, the downside of most of these methods is that your domicile becomes the collateral for the money you borrow. So, if your business goes south and you default, you could lose your home.

Here is what you need to know about taking out your home equity to invest in your business.

Home equity loans vs business loans: What’s the difference?

While they’re both forms of financing, a home equity loan differs from a business loan in several ways.

A home equity loan or line of credit (HELOC) is a debt that’s secured by your home, similar to a mortgage. Basically, it allows you to borrow against your equity stake — the portion of your home that you own outright, as opposed to the amount owed on your mortgage — up to a certain percentage.

Bankrate insights box: For example, let’s say your home was purchased for $350,000. You put down $50,000, and took out a $300,000 mortgage. A few years later, your home appraises for $500,000, and you have $200,000 left on your mortgage. You would then have $300,000 in equity and could borrow up to 85 percent of that, depending on your lender (most won’t let you totally tap your ownership stake, make you maintain a certain amount in the home).

Home equity loans often have long terms — 10 to 20 years and fixed interest rates. HELOCs typically offer variable interest rates. Your personal financials, such as your credit score, income and debts, factor into the sort of interest rate a bank, credit union or mortgage company might offer you.

In contrast, a business loan is a loan taken out against your (new) company or enterprise. They may be secured or unsecured , but if the former, assets or something else related to the business usually acts as collateral. You get the funds in a lump sum, though business lines of credit also exist.

Terms can vary greatly, but business loans tend to be shorter than home equity loans. They often require a strong personal and corporate credit history, including credit scores — or a strong business plan/projections for earnings (for start-ups). Repayment of the loan should come out of business income.

Harder to qualify for, commercial business loans also may have higher interest rates than home equity loans. The current average home equity loan interest rate is 8.49 percent ( slightly higher for HELOCs), whereas a $50,000 SBA microloan (tailor made for new small business owners) could run you up to 13 percent interest.

If you are just starting out, a home equity loan may allow you to borrow more money at a lower interest rate than a small business loan .

What types of home equity can be used to invest in a business?

There are several different ways to tap your home equity to fund your business idea. Here are some of the most common.

Cash-Out Refinance

A cash-out refinance mortgage is a new, bigger mortgage loan on your home that replaces your current one. You can take the difference between the two loans in cash.

How much cash you can access depends on the equity you have in the home. You may also be able to change the terms of your mortgage, including the length or term of repayments and the interest rate.

Pros of using a cash-out refinance

  • Avoid adding a second lien onto your home
  • You can redefine the mortgage terms
  • One payment a month vs a mortgage payment plus a loan payment

Cons of using a cash-out refinance

  • Time-consuming application process (similar to taking out first mortgage)
  • Depending on current interest rates, you may end up with a larger monthly mortgage payment
  • You will have to pay closing costs and other fees

Home Equity Loans and HELOCs

Home equity loans are fixed-rate loans that let you borrow a specific amount, received in one lump-sum payment. Unlike a cash-out refinance, a home equity loan doesn’t replace your original mortgage. Instead, it becomes a second lien on your property. In fact, these loans are often known as second mortgages.

A home equity line of credit (HELOC) is a revolving line of credit with a variable interest rate that will rise and fall over time. Unlike a home equity loan, a HELOC allows you to use the funds, repay them and then borrow again, somewhat like a credit card.

You can borrow money during what is known as the draw period , often 10 years. After that, you re-enter the repayment period of the HELOC. You can no longer withdraw funds, but only repay your debt. This period usually lasts up to 20 years.

Because your home is the collateral for the loan, you can fall into foreclosure if you stop paying your home equity loan or HELOC back.

Pros of using a home equity loan or HELOC

  • Long repayment periods; with HELOC, option just to repay interest at first
  • Relatively simple application process
  •  Only pay interest on sums you actually withdraw (HELOC)
  • Possible tax deduction of loan interest (if funds used on home — say, to build addition for the business)

Cons of using a home equity loan or HELOC

  • You put your home at risk if you default
  • HELOC repayments can vary, due to fluctuating interest rates
  • If your home declines in value, you could find yourself owing more than the home is worth

Equity sharing agreement

Another route to accessing your equity is by entering into an shared-equity agreement . This isn’t a loan so much as an investment. An equity-sharing company pays you for a portion of your home’s future value, to be repaid when the agreement expires or when you sell the house. Essentially, the company will own a stake in your home. Exact arrangements vary, but typically, at payback time, you return the initial investment, plus a percentage of the home’s appreciation.

Home equity shares often come with lower credit and income criteria than a refinance, home equity loan or HELOC; they’re frequently geared to people who can’t qualify for more traditional financing. Unlike home equity loans, no monthly payments or interest are charged when you enter an equity-sharing agreement — helpful if your cash flow is being consumed by your new venture — and the money is disbursed in a lump sum.

Pros of using an equity sharing agreement

  • No monthly repayments of principal or interest
  • Often easier to qualify for than home equity loan or refinance
  • Long period until repayment

Cons of using an equity sharing agreement

  • May not receive as much in funding
  • Repayment due in one big lump sum
  • Could conceivably end up repaying much more than you received or what you would’ve paid in loan interest

How to fund your business with home equity

Cashing in on your equity to start your business takes some planning. While the requirements can be less stringent than for a business loan, and the process less onerous, approaching the application with a strategy and an idea of what to expect will better set you up for success.

1. Make a plan for your business.

While you technically aren’t required to provide a business plan to cash out your equity, it’s still a good idea to outline how you’ll build your business, what your target audience is, what your overhead will be and how you plan to profit. This will help inform you how much money you need and when you can pay it back.

2. Research options and providers

Consider each equity cash-out method when deciding how you’ll fund your business. The pros and cons of different home equity methods to start a business vary; for example, a HELOC can provide a more flexible cash flow than a lump sum from a refinance or an equity loan.

The interest rate you’ll get will impact how much you’ll end up paying back, so shop around and make sure your credit is strong for the best rates.

3. Check your requirements

All equity cash-outs and loans come with equity and credit score minimums. Many lenders require you to keep 20 percent equity in your home and allow you to take out up to 85 percent (in some cases) of your equity. Credit score and income requirements vary, but will generally be around the mid-600s for home equity loans, refinances and HELOCs.

4. Figure out how you’ll repay

Paying back your loan is an integral part of your business and long-term financial plans and one of the challenges of starting a small business.

Depending on which method you choose, you may have to make payments on your loan straight away — which can be an issue if you don’t immediately turn a profit. Make sure to have a way to make the monthly payment when you have a slow month. With a home equity agreement, since the payment is provided upon the sale of the house or at the end of the agreement, you don’t have to make a monthly payment. But bear in mind that you’ll be making a big payment at the end.

5. Gather the necessary documents

Depending on which method you select, you must provide your servicer with documentation relating to your credit score, homeownership and taxes. Some banks allow you to apply online; others require an in-person application.

6. Apply and wait

Once you’re ready, go ahead and apply. Your servicer may pre-qualify you for a certain amount, giving you a benchmark of how much cash you’ll receive. You’ll also have to undergo a house appraisal to determine how much the house is worth, alongside other possible application requirements. Depending on the method, it can take you anywhere from a couple of weeks to a couple of months to get your money.

Can home equity be used as collateral?

What kind of home equity loan allows you to receive a lump sum, related articles.

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Financing | Templates

How To Write an SBA Business Plan [+Free Template]

Published June 13, 2023

Published Jun 13, 2023

Tricia Jones

REVIEWED BY: Tricia Jones

Andrew Wan

WRITTEN BY: Andrew Wan

This article is part of a larger series on Business Financing .

  • 1. Write the Company Description
  • 2. Identify Organization & Management
  • 3. Specify the Market Analysis
  • 4. Write Descriptions of the Products or Services
  • 5. Indicate the Marketing & Sales Strategy
  • 6. List Financial Data & Projections
  • 7. Write the Financing Request
  • 8. Fill In the Appendix & Supplemental Information
  • 9. Complete the Executive Summary
  • Additional Resources

Bottom Line

If you’re applying for a loan from the Small Business Administration (SBA), there’s a good chance that you’ll need a business plan to get approved. An SBA business plan provides a summary of the various aspects of your business, and we will guide you through the process of creating it, from writing your company description and marketing and sales strategies to completing financial data and projections and your executive summary.

Although there is no standard format, and to help you ensure nothing is overlooked, you can use our SBA business plan template to ensure you cover the most important areas of your company. A well-prepared business plan can improve your chances of getting an SBA loan.

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Step 1: write the company description.

This section should contain information about the purpose of your business. It should include a description of the problem or challenge your product or service aims to solve and what types of individuals or organizations will benefit.

A strong company description should also address the following questions:

  • Why does your company exist?
  • What problems does your business aim to address?
  • What prompted you to start your business?
  • What organizations or individuals will benefit from your company’s product or service?
  • What makes your company different from others?
  • What competitive advantages does your business offer?
  • What would a successful product launch look like?
  • Does your company have strategic partnerships with other vendors?

Step 2: Identify Organization & Management

Details about the legal and tax structure of your business should be included in this section. It can also be helpful to include an organizational chart of your company. You can include information about each team member’s background and experience and how it is relevant to your company:

  • Highlight what business structure you have selected and why. Examples commonly include a sole proprietorship, limited liability company (LLC), partnership, S corporation (S-corp), and C corporation (C-corp)
  • Include an organizational chart showing which team members are responsible for the various aspects of your company
  • You can include resumes for members of your leadership team highlighting their experience and background

Step 3: Specify the Market Analysis

The market analysis section of your SBA business plan should look at who your competitors will be. Look at what they are doing well, what their weaknesses are, and how your company compares.

The SBA’s market analysis page contains information on how you can approach this. Questions you should also consider addressing should include:

  • Who are the major competitors in the market?
  • What are competitors doing well and are there areas for improvement?
  • How does your company compare to the top competitors?
  • How has the product or service evolved over time?
  • Are there any trends for supply and demand throughout the year?
  • What can your company do to stand apart from the top competitors?

Step 4: Write Descriptions of the Products or Services

In this section, you should detail the product or service offered by your business. You should explain what it does, how it helps your customers, and its expected lifecycle. You can also include things like any expected research and development costs, intellectual property concerns such as patents, what the lifecycle of your product looks like, and what is needed to manufacture or assemble it.

Here are some things to consider as you are working on this section:

  • Description of what your product or service does
  • How your product or service works
  • How your customers will benefit from your product or service
  • Illustration of the typical lifecycle
  • Any patents or intellectual property you or your competitors have
  • Pricing structure
  • Plans for research and development
  • Discuss plans for handling intellectual property, copyright, and patent filings

Step 5: Indicate the Marketing & Sales Strategy

Details of your marketing and sales strategy will be highly dependent on your business. It’s also something that may evolve and change over time in response to things like the overall economic environment, release of competitor’s products or services, and changes in pricing.

With that being said, here is a list of some items that should be addressed:

  • Who is your target audience?
  • How will you attract customers?
  • How and where will sales be made?
  • If applicable, what will the sales process look like?
  • Where will you market and advertise your product or service?
  • How does your marketing strategy compare to other companies in the industry?
  • How much should you spend on marketing?
  • What is the expected return on investment for marketing?
  • Do you have any data showing the effect of marketing?

Step 6: List Financial Data & Projections

If your business has been running, you should include information about its finances. This should include all streams of revenue and expenses. Data for financial projections should also be included, along with a description of the methodology you used to reach those conclusions.

If available, you should be prepared to provide the following financial documents for at least the last three years to five years:

  • Personal and business tax returns
  • Balance sheets
  • Profit and loss (P&L) statements
  • Cash flow statements
  • Hard and soft collateral owned by your business
  • Business bank statements for the last six to 12 months

Financial projections should include enough data to offer some confidence that your business is viable and will succeed. It’s recommended that you provide monthly projections looking forward at least three years, with annual projections for years four and five.

  • Projections for revenue and methodology used in arriving at these figures
  • Expected shifts in revenue or expenses as a result of seasonality or other factors affecting supply and demand
  • Expected expenses from loan payments, rent, lease payments, marketing and advertising fees, employee salaries, benefits, legal fees, warranty expenses, and more

You can use our SBA loan calculator to help you estimate monthly payments for the funding you’re currently looking for and projections for any additional loans you may need. Monthly payments can fluctuate depending on the terms of your loan. If you’re looking for accurate estimates, you can read our article on SBA loan rates .

Step 7: Write the Financing Request

This section is where you should specify how much funding you need, why you need it, what you’ll use it for, and the impact you expect it will have on your business. It’s also a good idea to indicate when you expect to use the funds over the course of the next three to five years.

Here is a checklist of some important items you should cover:

  • How much funding you need and why
  • When you will use the funds over the next three to five years
  • What you will use the funds for
  • The expected impact this will have on your business and how it will help reach your business goals
  • The anticipation of any recurring needs for additional funding
  • Your strategy for how you expect to pay off the loan
  • Any future financial plans for your business

Step 8: Fill In the Appendix & Supplemental Information

This last section of your SBA business plan should include any additional information that may be helpful for lenders. This can include more detailed explanations or clarifications of data from other sections of your business plan.

Here are some examples of documents you can include:

  • Business licenses
  • Certifications or permits
  • Letters of reference
  • Photos of products
  • Resumes of business owners
  • Contractual agreements and other legal documents

Step 9: Complete the Executive Summary

The executive summary, which is the first section in a business plan, should be no more than one to two pages and provide a high-level overview of the items listed below. Since each section above is already detailed, a brief description of those sections will be sufficient:

  • Your company’s mission statement
  • The background and experience of your leadership team
  • The product or service and what purpose it serves
  • Your target market for the product or service
  • Competitive analysis of other products and services
  • Your competitive advantage or why your company will succeed
  • Marketing and sales strategy
  • Financial projections and funding needs

Depending on the type of SBA loan you’re applying for, certain areas of your business plan may be weighed more heavily than others. You can learn about the SBA loan options you can choose from in our guide on the different types of SBA loans .

Additional Resources for Writing an SBA Business Plan

If you’re looking for additional resources to help you write a business plan, you can consider the options below. Since a business plan is just one of many documents you’ll need, you can also read our guide on how to get an SBA loan if you need help with other areas of the loan process:

  • SBA: SBA’s business guide contains information on how you can start a small business. It includes steps on creating a business plan, funding your company, and launching a business.
  • SCORE: Through SCORE, you can request to be paired with a mentor and get business-related education. Educational courses come in several formats, including webinars, live events, and online courses.
  • Small Business Development Center (SBDC): SBDCs provide training and counseling to small business owners. This can help with various aspects of your company such as getting access to working capital, business planning, financial management, and more. You can use the SBA’s tool to find your closest SBDC .

Having a strong SBA business plan can improve your chances of getting approved for an SBA loan. If you’re unsure where to start, you can use our guide and template to cover the most important aspects of your business. You can also see our tips on how to get a small business loan . To get even more ideas on creating a strong business plan, you can also utilize resources through organizations such as SCORE and the SBA itself.

About the Author

Andrew Wan

Find Andrew On LinkedIn

Andrew Wan is a staff writer at Fit Small Business, specializing in Small Business Finance. He has over a decade of experience in mortgage lending, having held roles as a loan officer, processor, and underwriter. He is experienced with various types of mortgage loans, including Federal Housing Administration government mortgages as a Direct Endorsement (DE) underwriter. Andrew received an M.B.A. from the University of California at Irvine, a Master of Studies in Law from the University of Southern California, and holds a California real estate broker license.

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House Flipping Business Plan Template

  • Written by Dave Lavinsky

House Flipping Business Plan

Table of Contents

House flipping business plan.

Over the past 20+ years, we have helped over 10,000 entrepreneurs and business owners create business plans to start and grow their house flipping businesses. On this page, we will first give you some background information with regards to the importance of business planning. We will then go through a house flipping business plan template step-by-step so you can create your plan today.

Download our Ultimate Business Plan Template here >

What Is a House Flipping Business Plan?

A business plan provides a snapshot of your house flipping business as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategy for reaching them. It also includes market research to support your plans.

Why You Need a Business Plan for Your House Flipping Business

If you’re looking to start a house flipping business, or grow your existing house flipping business, you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your house flipping business in order to improve your chances of success. Your house flipping business plan is a living document that should be updated annually as your company grows and changes.

Sources of Funding for House Flipping Businesses

With regards to funding, the main sources of funding for a house flipping business are personal savings, credit cards, bank loans and angel investors. With regards to bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to confirm that your financials are reasonable, but they will also want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business.

Personal savings is the other most common form of funding for a house flipping business. Venture capitalists will usually not fund a house flipping business. They might consider funding a house flipping business with a national presence, but never an individual location. This is because most venture capitalists are looking for millions of dollars in return when they make an investment, and an individual location could never achieve such results.  With that said, personal savings and bank loans are the most common funding paths for house flippers.

Finish Your Business Plan Today!

If you want to start a house flipping business or expand your current one, you need a business plan. Below are links to each section of your house flipping business plan template:

Executive Summary

Your executive summary provides an introduction to your business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.

The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of house flipping business you are operating and the status. For example, are you a startup, do you have a house flipping business that you would like to grow, or are you operating a chain of house flipping businesses?

Next, provide an overview of each of the subsequent sections of your plan. For example, give a brief overview of the house flipping industry. Discuss the type of house flipping business you are operating. Detail your direct competitors. Give an overview of your target customers. Provide a snapshot of your marketing plan. Identify the key members of your team. And offer an overview of your financial plan.  

Company Analysis

In your company analysis, you will detail the type of house flipping business you are operating.

For example, you might operate one of the following types of house flipping businesses:

  • Single Family Home : this type of house flipping business focuses on one property that is usually bought at a low price, completely renovated and then sold for a profit.
  • Multi-unit Complex: this type of business focuses on a multi-unit building where a house flipper rehabs every unit within the building and then either sells those units individually or sells the complex as a whole.
  • Multi-investor Flipping: this type of house flipping is where houses are flipped between multiple investors before it enters the fix and flip stage.

In addition to explaining the type of house flipping business you will operate, the Company Analysis section of your business plan needs to provide background on the business.

Include answers to question such as:

  • When and why did you start the business?
  • What milestones have you achieved to date? Milestones could include the number of customers served, number of positive reviews, number of referrals, etc.
  • Your legal structure. Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.

Industry Analysis

In your industry analysis, you need to provide an overview of the house flipping industry.

While this may seem unnecessary, it serves multiple purposes.

First, researching the house flipping industry educates you. It helps you understand the market in which you are operating. 

Secondly, market research can improve your strategy, particularly if your research identifies market trends.

The third reason for market research is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.

The following questions should be answered in the industry analysis section of your house flipping business plan:

  • How big is the house flipping industry (in dollars)?
  • Is the market declining or increasing?
  • Who are the key competitors in the market?
  • Who are the key suppliers in the market?
  • What trends are affecting the industry?
  • What is the industry’s growth forecast over the next 5 – 10 years?
  • What is the relevant market size? That is, how big is the potential market for your house flipping business? You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.

Customer Analysis

The customer analysis section of your real estate flipping business plan must detail the customers you serve and/or expect to serve.

The following are examples of customer segments: homeowners, prospective homeowners, contractors and real estate agents.

As you can imagine, the customer segment(s) you choose will have a great impact on the type of house flipping business you operate. Clearly, prospective buyers would respond to different marketing promotions than contractors, for example.

Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, include a discussion of the ages, genders, locations and income levels of the customers you seek to serve. Because most house flipping businesses primarily serve customers living in their same city or town, such demographic information is easy to find on government websites.

Psychographic profiles explain the wants and needs of your target customers. The more you can understand and define these needs, the better you will do in attracting and retaining your customers.

With Growthink’s Ultimate Business Plan Template you can finish your plan in just 8 hours or less!

Competitive Analysis

Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.

Direct competitors are other house flipping businesses. 

Indirect competitors are other options that customers have to purchase from that aren’t direct competitors. This includes real estate agents, online home listing services and investors. You need to mention such competition as well.

With regards to direct competition, you want to describe the other house flipping businesses with which you compete. Most likely, your direct competitors will be house flippers located very close to your location.

For each such competitor, provide an overview of their businesses and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as:

  • What types of customers do they serve?
  • What types of housing units do they buy, rehab and sell?
  • What is their pricing (premium, low, etc.)?
  • What are they good at?
  • What are their weaknesses?

With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.

The final part of your competitive analysis section is to document your areas of competitive advantage. For example:

  • Will you provide better design, construction and renovation services?
  • Will you provide services that your competitors don’t offer?
  • Will you provide better customer service?
  • Will you offer better pricing?

Think about ways you will outperform your competition and document them in this section of your plan.  

Marketing Plan

Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a house flipping business plan, your marketing plan should include the following:

Product : In the product section, you should reiterate the type of house flipping company that you documented in your Company Analysis. Then, detail the specific products you will be offering. For example, in addition to house flipping, will you provide custom interior design services, financing or any other services?

Price : Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your marketing plan, you are presenting the services you offer and their prices.

Place : Place refers to the location of your house flipping company. Document your location and mention how the location will impact your success. For example, is your house flipping business located in a busy retail district, shopping plaza, mall, etc. Discuss how your location might be the ideal location for your customers.

Promotions : The final part of your house flipping marketing plan is the promotions section. Here you will document how you will drive customers to your location(s). The following are some promotional methods you might consider:

  • Advertising in local papers and magazines
  • Reaching out to local websites 
  • Social media marketing
  • Local radio advertising

Operations Plan

While the earlier sections of your business plan for flipping houses explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.

Everyday short-term processes include all of the tasks involved in running your house flipping business, including scouting properties, attending house auctions, renovating homes and meeting with potential buyers. 

Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to sell your 50th home, or when you hope to reach $X in revenue. It could also be when you expect to expand your house flipping business to a new city.  

Management Team

To demonstrate your house flipping business’ ability to succeed, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company. 

Ideally you and/or your team members have direct experience in managing house flipping businesses. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.

If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act like mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in managing house flips or successfully running small businesses.  

Financial Plan

Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet and cash flow statements.

Income Statement : an income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenues and then subtracts your costs to show whether you turned a profit or not.

In developing your income statement, you need to devise assumptions. For example, will you purchase one new home per month or per quarter? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.

Balance Sheets : Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $50,000 on building out your house flipping business, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a bank writes you a check for $50,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.

Cash Flow Statement : Your cash flow statement will help determine how much money you need to start or grow your business, and make sure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt. 

In developing your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a house flipping business:

  • Location build-out including design fees, construction, etc.
  • Cost of equipment and supplies
  • Payroll or salaries paid to staff
  • Business insurance
  • Taxes and permits
  • Legal expenses

Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your office location lease or blueprints of homes you are working on.   Summary Putting together a business plan for your house flipping business is a worthwhile endeavor. If you follow the sample template above, by the time you are done, you will have an expert house flipping business plan; download it to PDF to show banks and investors. You will really understand the house flipping industry, your competition, and your customers. You will have developed a marketing plan and will really understand what it takes to launch and grow a successful house flipping business.

House Flipping Business Plan FAQs

What is the easiest way to complete my house flipping business plan.

Growthink's Ultimate Business Plan Template allows you to quickly and easily complete your House Flipping Business Plan.

Where Can I Download a House Flipping Business Plan PDF?

You can download a house flipping business plan pdf here.

What is the Goal of a Business Plan's Executive Summary?

The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of house flipping business you are operating and the status; for example, are you a startup, do you have a house flipping business that you would like to grow, or are you operating a chain of house flipping businesses?

  OR, Let Us Develop Your Plan For You Since 1999, Growthink has developed business plans for thousands of companies who have gone on to achieve tremendous success.

Click here to see how Growthink’s professional business plan consulting services can create your business plan for you.   Other Helpful Business Plan Articles & Templates

Business Plan Template & Guide For Small Businesses

Rehab Financial | Private Money Lender

How to Write a House Flipping Business Plan

The most important part of starting a new rehab project is having a house flipping business plan.

Before making an offer on a property, you need to define what your goals are for the project and how you’re planning to reach them. House flipping needs to be approached from an objective and quantifiable perspective, not an emotional one. As such, a house flipping project plan is essential to create a clear path to success.

To make the process as easy as possible, we have created a free house flipping business plan that you can download.

We also encourage you to read the rest of this article to help you understand each part of the house flipping business plan.

Click Here Get Your Free House Flipping Business Plan Template

Benefits of writing a house flipping business plan, writing a house flipping project plan is important because:.

  • It will turn your vague ideas into concrete thoughts.
  • It will help you to resolve lingering issues that you keep pushing off.
  • It will help you to fully understand what you are getting into and how to get out of it.
  • It will force you to consider the time, money and emotional commitment needed.
  • It will force you to address your tolerance for risk.
  • It will make you think about your own strengths and weaknesses and identify areas where you may need assistance.
  • It will show people who are working with you (lenders, lawyers, contractors, etc.) that you are serious about the project.
  • It will improve your chances of getting approved for a loan.
  • It will help you plan and organize your house flipping business beyond single house flips
  • It will let you know if/when you are going off-track

House Flipping Business Plan Outline

Now that you know why you should create a house flipping business plan, let’s jump into what a business plan actually looks like.

Our free house flipping business plan template includes the following topics:

Executive Summary

Mission statement.

  • Market Analysis
  • Strategy, Timing, and Financial Projections
  • Team Description

Exit Strategies and Backup Plans

What are you doing.

The executive summary is the elevator pitch version of your business plan. It should briefly cover all of the topics covered in the business plan, starting with your mission statement and a brief overview of the project goals.

If someone only has time to read one page of your house flipping business plan, this will be it. They should gain a basic understanding of the whole project, your ideas, and what you bring to the table. It’s often easiest to write this piece last after all of your planning from the other sections are established.

Why are you embarking on this business venture?

The mission statement is a one to three sentence synopsis of your project objectives and the underlying philosophies behind them. This statement says a lot about your central ideals and business culture, and it is very important when laying the foundations for your project.

When writing your mission statement, cut the jargon! Make it clear, concise and useful.

Comparative Market Analysis

What is the economic environment surrounding your project.

business plan for house loan

Read more about how to prepare your own CMA in our Real Estate Strategy section.

Understanding the neighborhood where you are buying is essential to your success. Only when you have done your own due diligence can you be sure that you are getting a good deal. In the end, your thoughtful planning should be rewarded with moving forward on a successful project.

Sites such as Realtor , Zillow , and Trulia are all free sites that can give you information on the property to be purchased and neighborhood value. These sites can show you the selling prices of nearby homes and the characteristics of the home (bedrooms, bathrooms, square footage, lot size, etc.), allowing comparisons to be made between properties. These sites will also show you what is for sale in the neighborhood, so you will have a sense of the competition in the local market. Another great strategy is attending as many open houses in the neighborhood as possible to get a real sense of size, finishes, configurations, and more.

Below is a list of ways to better understand the market you want to buy in:

  • Work with a realtor to help you identify properties
  • Join real estate investment groups to get education
  • Align with a wholesaler
  • Find lists on the Internet
  • Review foreclosure sale lists

All of these tools may help you identify your best opportunities, but you must do the work yourself, and not rely on what others tell you.

Once you do your due diligence, be sure you describe your research and rationale within your business plan. Write this section as an organized series of data points that explain the decisions that you are making with the choice of house and rehabbing decisions.

The goal of this section is to show a third party reader where the property and project fit in the current economic and regional real estate markets.

A house flipping business plan will force you to consider any difficulties that may arise, and prepare for them. This is just one of the ways that a house flipping project plan can help you plan, prepare, and get ahead of future roadblocks.

Project timeframe, how long will your project take.

Now that you’ve outlined your executive summary, mission and market analysis, you’ll want to develop a timeframe for your rehab project.

Keep in mind that rehabbing and flipping always takes longer and costs more than you think it will. Make a timeline that is realistic, and then add additional time to it to cover inevitable delays that you can’t initially account for.

Next, “cost out” each month on your timeline being as detailed as possible.

Consider the following questions when costing out your timeline:

  • How much will you need to pay on the loan you have for the property?
  • How much are insurance and taxes monthly?
  • How much will you need to pay your contractor?
  • How much are the monthly utility bills going to be?

To read more about developing a project timeline, read Chapter 4 of our Flipping Houses 101 Guide, “ Develop a Property Investment Plan and Timeline .”

Financial Projections

How much will it cost where will the time & money go.

After you determine how long your flipping project will take, you will need to show a budget and financial projection. The financial projection takes into account both time spent flipping the property and money spent across the whole project. This is one of the most important sections of the business plan.

Here are a few costs to include in your budget:

  • Cost of the property
  • Expected rehab costs
  • Other expenses like marketing costs to sell the property
  • Additional contingency expenses

Add all of these costs to get a total investment number.

Then, provide a realistic, supportable value for the sale of the property and deduct liquidation costs (such as realtor fees, transfer taxes, etc.) to project your expected profit on the property.

Use our House Flipping Calculator to help calculate a cost breakdown for your project, and then include these details in your business plan. This will not only help you identify potential budget challenges, but also show people you are working with that you’ve strategically thought through your budget!

Pro tip: Make sure that your numbers are realistic, and do not rely on everything going right.

After identifying all of the costs to buy a home, and how long it will take to actually complete the rehab, you should be able to fully estimate your cash flow through the duration of the project. This financial projection will help you understand how much cash is necessary to keep your project moving forward.

Financing Strategy

How do you plan to fund your project.

This section of the business plan should identify all of the sources of your start-up capital for your rehab project. To put it simply: Where will you get the money to flip a house?

There are numerous house flipping funding options, including:

  • Conventional Mortgage
  • Government Insured Loans
  • Owner Financing
  • Private Money

Keep in mind that your source of funding will have an impact on your timeline, costs and overall budget.

In the world of real estate investing, an all-cash offer is always preferred over an offer from someone with financing contingencies. Financing your project with your own cash is a good option if you don’t want to be in debt to an institution. However, most house flippers cannot afford to flip a house without financial help. It’s important to do your research about each type of funding listed above to compare the short and long term costs of each option.

To learn more about these six types of funding, check out Chapter 3 of our Flipping Houses 101 Guide, “ Getting Rehab Funding Right .”

If you want to get funding from a lender, watch the video below, where Rehab Financial’s President, Susan Naftulin, offers key tips to help you get approved by a lender.

Once you choose a source of funding, clearly explain which financial assistance you intend to use in your house flipping business plan, if you are going to get pre-approved, and how far in advance you plan to get pre-approved.

About Your Team

How is your organization structured are you building a team or taking on responsibilities yourself.

Now, you need to decide how you want your house flipping business to be organized.

Do you want to borrow in your own name as a sole proprietor? Or, do you want to form a partnership, corporation, limited liability company?

Read more about the best business structures for real estate investors in our Real Estate Strategy section.

You may need to seek the advice of an attorney or accountant to fully understand the implications of each organization type. Be careful about this choice, because your selection can affect your ability to borrow money, mitigate your risk, attract investors, etc.

This section of the business plan is also where you should talk about yourself. Include a brief bio, relevant experience and unique skills that will be advantageous to your company.

If you are working with a house flipping team , include who these people are, and why you chose to work with them. Make sure that the reader understands what you are doing and how the team you are working with will contribute to a successful rehab project.

How are you getting out of the investment? Do you have contingencies in place in case of unforeseen circumstances?

Finally, your house flipping business plan needs to address your exit strategy. Essentially, an exit strategy is what a house flipper plans to do with their property once the rehab is complete.

You also need to address contingencies in case the project doesn’t go as planned.

Below are a few examples of common scenarios where you’ll need to explain your contingency plans.

Scenario 1: Your property doesn’t sell

  • What will you do if your property does not sell? Will you use it as a rental?
  • If so, you should show that the rental will pay the carrying expenses of the building.

Scenario 2: You’re going to use your property as a rental

  • Do you plan to refinance the property and hold it as a rental?
  • If so, show your plans for refinancing it, but also show what you will do if you cannot obtain the needed credit.

Scenario 3: You’re going to sell the property

  • Will you sell the property?
  • If so, state how much you plan to sell it for. In addition, you will also need to know the rules related to your exit strategy.

Scenario 4: You’re going to sell the property to an FHA buyer

  • Do you plan to sell to an FHA buyer?
  • If so, make sure you understand the anti-flipping regulations to make sure you aren’t trying to sell too soon. Generally, you will need to hold the property for more than 90 days in an FHA situation.

Why a House Flipping Business Plan is Crucial

A thorough, well-written business plan can be an invaluable tool in helping you meet your house flipping goals. Time spent on planning at the beginning of the process will save you immeasurable time, money and worry during the process.

Get Your Free House Flipping Business Plan Template

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House Flipping Business Plan

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  • Free Business Plan Download
  • Do you need a Formal Business Plan?
  • Why write a Business Plan?
  • Components of a Business Plan

Executive Summary

  • Organizational Structure and Team
  • Strategies and Processes
  • Company Goals
  • Keys to Success

Download Our House Flipping Business Plan Template

House Flipper

Reason # 1 To Map Out the Future of Your Business

Reason # 2 to create a plan of action, reason # 3 to set quantifiable revenue & profit goals, reason # 4 to get funding from business partners & lenders.

  • Organizational Structure, Team & Operations Plan
  • Business Systems & Processes
  • Business Goals & Strateges

House Flipper

Organizational Structure

Business entity & structure.

House Flipping Business Plan Structure

Talk About Yourself

Talk about your team.

House Flipping Business Plan Team

Business Strategies & Processes

Market strategy, targeting your ideal house flip, leads & acquisition strategies.

House Flipping Business Plan Leads and Acquisitions

Deal Due Diligence

House Flipping Business Plan Due Dligence

Project Management Strategies

House Flipping Business Plan Construction Management

Business Goals & Forecasts

3 to 5 year financial plan, project goals.

House Flipping Business 5 Year Outlook

Revenue Goals

Profit goals, keys to success and meeting your goals, project team/strategic hires, strategic partnerships/relationships, business systems, ready to take action.

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The White House 1600 Pennsylvania Ave NW Washington, DC 20500

Remarks by President   Biden on the Saving on a Valuable Education Plan | Culver City,   CA

Culver City Julian Dixon Library Culver City, California

1:18 P.M. PST

THE PRESIDENT:  Thank you, thank you, thank you.  (Applause.)

Well, Dr. Saint-Paul, thank you very much for that introduction.  But, you know, you’re — you’re like thousands of others who — who took out loans for undergraduate school and graduate school and — because you wanted to serve your community, and you have.

But, in the meantime, that $90,000 you borrowed grew to $145,000, even though you kept paying on a monthly basis.

Folks, I’m happy to have been able to forgive these loans because when we realize and relieve Americans of their student debt, they’re free to chase their dreams.

And, Doc, you’ve got one of your dreams: your baby girl.  And a — and by the way, an awful lot of people with student debt are putting off whether they can have a child, whether they can — a whole range of basic, basic, fundamental issues.

And, Mayor Bass, thank you for your partnership and, more importantly for me, your friendship.

And I want to thank the Culver City Mayor.  Where are you, Mayor?

MAYOR MCMORRIN:  Right here.

THE PRESIDENT:  Thank you.  (Laughter.)  Thank you, thank you, thank you. 

It’s great to — and it’s great to be joined by members of Congress: Alex in the Senate and Sydney in the House.  I really appreciate you being here.  It’s a busman’s holiday for you guys to come hear another public official speak, but thank you.

And I know our great Vice President sends her love to all her California friends.  She constantly — all I hear about is California, you know?  (Laughter.)  No, I’m glad to be here.  When I was vice president, all I heard about was Chicago, you know?  (Laughter.)  But I’m making — trying to make sure they hear about Delaware, but it ain’t working yet.  (Laughter.)

Look, Kamala and I ran to lead this country.  We made a commitment to fix our broken student loan system.  That was one of the things we both talked about in the beginning.  Because while a college degree is still a ticket to a better life, that ticket is too expensive.   And too many Americans are still saddled with unsustainable debt in exchange for a college degree.

So, there was a student loan program to be able to afford a college degree, but a lot of people didn’t take advantage of it.  What — and I wanted to make sure they did.

The ability to repay, though, has become so burdensome, a lot of people can’t even repay.  And they try.  They — they don’t miss payments.  They work like the devil every month to pay their bills.  But even if they pay their loans, their debt increases.  It doesn’t diminish because of interest rates.

And I thought I’d — make a lot more sense to relieve student debt for families and it would grow our economy. 

Well, there’s a — were existing programs in the law.  To fix and adjust the programs, we had — we had to change them to make people actually — make them available for — make people eligible.  And that’s what I’ve done when the Supreme Court said I couldn’t go ahead and relieve all the debt.

It helps everyone, not just the people whose debt is relieved.  But when people with student debt are re- — student debt relieved, they buy homes, they start businesses, they contribute.  They engage in the community in ways they weren’t able to before.  That actually grows the economy.  It grows the economy.

That’s why my — my administration is taking significant action to provide student debt relief to so many borrows — borrowers that — many of whom didn’t know they were — they were able to get relief, and do it as quickly and as — as possible.

Look, early in my term, I announced a major plan to provide millions of working families with debt relief for their college student debt.  Tens of millions of people in debt were literally about to be canceled — their debts.  But my MAGA Republican friends in the Congress, elected officials, and special interests stepped in and sued us.  And the Supreme Court blocked it.  They blocked it.

But that didn’t stop me.  I announced we were going to pursue alternative paths for student debt relief for as many borrowers as possible.  And that’s the effort that’s been underway the last two years.

I fixed what’s called the “SAVE Plan.”  It existed, but I fixed it to make it the most affordable repayment plan ever.

Before I took office, student borrowers had to pay 10 percent of their discretionary income on a monthly basis.  If they made less than — if they didn’t have enough to do that, they were able to not have to pay that month, but the interest continued.  A lot of people don’t have the means to do that, though.

Under my SAVE Plan, we’re cutting in half to 5 percent the undergraduate borrowers — what undergraduate borrowers have to pay after their living expenses are accounted for.

That means no one with an undergraduate loan, whether it’s a community college or a four-year college, will have to pay more than 5 percent of their discretionary income to repay those loans starting in July.  And that’s income after you pay the ne- — for necessities like food and housing. 

Already 7.5 million Americans have enrolled in this so-called SAVE Plan.  And there’s more than 4 million of those borrowers had their monthly payments drop to zero if they’re living paycheck to paycheck, below a certain level.

This plan is the most generous repayment program ever, and today we’re doing it even faster and quicker than ever before.

I’m proud to announce our SAVE plan.  We are immediately canceling the debt loans for over 150,000 borrowers nearly six months ahead of schedule.

Starting today, we are canceling student debt for borrowers who are enrolled in the SAVE Plan and have been paying student loans for as little as 10 years.  If they took less than tw- — if they borrowed less than $2,000, it’s forgiven — they — $12,000, excuse me, it’s for- — the loan is forgiven.

This action will be a huge help to graduates of community college and borrowers with smaller loans, putting them back on track faster for debt forgiveness than ever before. 

And this builds on other progress I’ve made in canceling student debt for close to 4 million Americans through various actions. 

For example, we fixed what was called the Public Service Loan program — Loan Forgiveness program, which was designed to make sure that school teachers, firefighters, law enforcement officers, social workers, public servants get their student loans forgiven if they make payments for 10 years in a row and the 10 years of public service at the same time.

When I took office, there were 7,000 public servants who had taken advantage of this program and had them forgiven, but thanks to the reforms we made in the program, now there are nearly 800,000 have had their debts forgiven — 800,000.  (Applause.) 

Look, let me close with this.  This is — kind of relief can be life-changing for individuals and for their families.  And it’s good for the economy as a whole.

By freeing millions of Americans from the crushing debt of student loan programs, it means they can finally get on with their lives instead of getting — their lives being put on hold.  They can think about buying a house, starting a home, starting a family, having a family future that they can enjoy, or saving for the family’s future — saving and being able to put away a little bit of money.

I’m proud to have been able to give borrowers, like so many of you, the relief you earned.  I promise you I’m never going to stop fighting for hardworking American families. 

 So, if you qualify, you’ll be hearing from me shortly.  Thousands of people per month are eligible — about 25,000 a month are eli- — or every two months — it will be paid at a 50,000 basis — but are eligible for relief, and they’ll be getting a letter from me letting them know they’re qualified.  And when they get that letter, your debt is going to be forgiven.

Look, folks, and it’s also helping you who don’t go to college.  It’s not just — you know, people say to me sometimes, “Well, Joe, that’s great, you’re helping people get into college, but how about all those hardworking people you grew up with in the neighborhood?  How about all those folks in labor unions?  How about all those hardworking people that work with their hands, why should they…”

Well, just today, my Labor Department announced 200 — this is not the student loan program, but $200 million in grants for registered — registered apprenticeship programs around the country — while you can learn a skilled trade and lead to good-paying jobs.

You know, everybody thinks if you’re an electrician, you — you say, “I want to be electrician,” and you’re all — you got to go to school, basically.  These apprenticeship programs are four and five years before you qualify to have a license.  They work like hell to get these licenses. 

And guess what?  If you work with your hands, you ought to be able to make a decent living.  And that’s why they’re doing it now with my prop- — my — my position on organized labor.

So, it matters.  All of this matters.

My dad used to say, “Joey, a — a paycheck is about more than — a job is about more than a paycheck.  It’s about your dignity.  It’s about opportunity.  It’s about being able to look your kid in the eye and say, ‘Honey, it’s going to be okay.  You got a chance.’” 

That’s all we’re doing — and people are taking advantage of it — giving people a chance, a fighting chance to make it, because no one who’s willing to work hard in America should be denied the opportunity to have that chance.

And so, I — how many of you had student loans forgiven here? 

All right.  (Laughter.) 

I tell you what, how about anybody over $10,000?  $30,000?  $50,000?

AUDIENCE MEMBER:  Next month.

THE PRESIDENT:  Next month?  Okay. 

Anyway.  Seriously, thank you. 

And people have to understand: You not only did the right thing by busting your neck and going back to school and doing as well as you did in school, but you’re breaking your neck for people.  You’re doing it through programs that benefit the society — benefit the American people. 

Just like I got criticized not long ago for being too favorable on organized labor and unions.  Well, they’re the best workers in the world.  They’re the most qualified technicians in the — no, they really are.  They really are.  

And — (applause) — and the economy is growing.  It’s growing — jobs, income — across the board.  We have the most advanced economy of any major nation in the world.

We’ve got a lot more to do, but with the help of all of you college graduates who — who have paid off your student loans now, I’m confident we’re going to get it all done.

Thank you, thank you, thank you, thank you.  Appreciate it.  (Applause.)

Q    Do you worry this will get shut down in court? THE PRESIDENT:  I don’t have a worry at all. 1:29 P.M. PST

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  • Personal Finance

Biden administration is canceling $1.2 billion in student-loan debt for 153,000 borrowers

Jillian berman, announcement comes as the white house is in the midst of revamping its broad debt relief plan, president joe biden will discuss the debt relief wednesday, and eligible borrowers will receive an email from the president..

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More than 150,000 borrowers who have been in repayment on their student loans for at least 10 years will have their debt cancelled, the Biden administration announced Wednesday. 

The 153,000 borrowers who will receive roughly $1.2 billion in debt relief are part of the first cohort of borrowers eligible for early debt forgiveness as part of the SAVE plan, an initiative the Biden administration launched last year.

Under that repayment plan, borrowers pay back their loans as a percentage of their income and have the remainder cancelled after a certain number of years. Borrowers using SAVE who took out $12,000 in studnet loans or less are eligible for debt relief after 10 years of payments. Originally that benefit wasn’t supposed to be available until July, but the Biden administration announced earlier this year that officials would start cancelling debt through that provision of the program this month. 

The debt cancellation is part of the administration’s “unapologetic commitment to deliver as much relief as possible to as many borrowers as possible as quickly as possible,” Secretary of Education Miguel Cardona told reporters. 

“The progress we’re announcing today demonstrates that we’re not only making good on that commitment but we’re doing so ahead of schedule.”  

Announcement comes amid broader debt-relief efforts

Wednesday’s announcement comes amid other efforts from the Biden administration to push its student-loan agenda forward after the Supreme Court knocked down the White House’s initial plan to cancel up to $20,000 in student debt for a wide swath of borrowers last year. Student-debt forgiveness was a key plank of Biden’s 2020 campaign. But more than 40% of Gen Z swing-state voters said in a December poll that they didn’t think Biden was doing enough to mitigate student debt. 

President Joe Biden touted the relief at an event in Culver City, California, Wednesday where he was introduced by a borrower who had her debt cancelled through his administration’s initiatives.

“This kind of relief can be life-changing for individuals and for their families and it’s good for the economy as a whole,” Biden said.

Borrowers eligible for the the debt cancellation will receive an email directly from Biden. In the email, Biden will reiterate his administration’s efforts on student debt and encourage recipients to “share what this relief means to you.” 

“I hope this relief gives you a little more breathing room,” the email reads. “I’ve heard from countless people who have told me that relieving the burden of their student-loan debt will allow them to support themselves and their families, buy their first home, start a small business and move forward with life plans they’ve put on hold.”

The Department of Education will also be reaching out to borrowers who could be eligible for early student-loan forgiveness if they enroll in SAVE, administration officials told reporters. 

Though the Biden administration has touted SAVE as transformative for borrowers and encouraged them to sign up, the government and student-loan servicers struggled to implement the plan in its early weeks. In the months leading up to and following the return to repayment after a more-than-three-year pause, borrowers reported challenges enrolling in SAVE. 

At the end of October, more than 450,000 applications for income-driven repayment plans, including SAVE, were still pending with a borrower’s servicer for more than 30 days, the Consumer Financial Protection Bureau reported in January.  

SAVE offers more generous benefits than previous repayment plans

Borrowers have been able to pay their student loans as a percentage of their income for years. But SAVE offers a few key benefits that aren’t available under previous versions of income-driven repayment. For example, if a borrower’s payment isn’t enough to cover the interest, then the government covers the rest. That means borrowers using SAVE don’t see their balances grow, a perennial source of stress for borrowers using other forms of income-driven repayment. 

In addition, the earliest borrowers can have their debt cancelled under most income-driven repayment plans is after 20 years of payments. By contrast, SAVE allows borrowers who borrowed relatively little to attend college — $12,000 or less — to have the debt wiped away after just 10 years of payments. In addition, for every $1,000 above $12,000 in original balance, borrowers are eligible for forgiveness after an additional year of payments (so $13,000 in debt requires 11 years of payments, $14,000 in debt requires 12 years of payments etc.) 

By providing relief earlier for borrowers who took on relatively small debt loads, officials are targeting the forgiveness towards community college students and borrowers who struggle the most to repay their student debt. 

The debt relief announced Wednesday is distinct from the Biden administration’s mass student-loan forgiveness plan, which would likely impact borrowers with all levels of student debt. In the wake of the Supreme Court’s decision last year, Biden vowed to take another stab at broad student-loan relief. Officials are in the midst of that process. 

As part of those efforts, the Department of Education said last week that it would like to make borrowers experiencing financial hardship as a result of their student loans eligible to have their debt cancelled as part of the broader relief effort. Stakeholders will meet this week to discuss the proposal as part of a process that will help to determine the scope of a new student debt-forgiveness initiative. 

The outcome of the process likely won’t be known for months. The final debt-forgiveness plan is likely to face legal challenges. 

In the meantime, the Biden administration has been cancelling debt for borrowers who have technically had the right to student-loan forgiveness under the law for years, but who hadn’t been able to access it due to technicalities. So far, officials have approved nearly $138 billion in debt cancellation for almost 3.9 million borrowers. That includes some public servants, some borrowers who have been in repayment on their debt for at least 20 years and borrowers who have been scammed by their schools.

A senior administration official told reporters that he didn’t have an update on how many of the 3.9 million borrowers have already seen their loan balances disappear. 

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About the Author

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Jillian Berman is the deputy enterprise editor at MarketWatch, where she covers student loans and consumer debt. You can follow her on Twitter @JillianBerman.

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Biden cancels $1.2 billion in student loans for borrowers enrolled in SAVE

White house announces loan forgiveness six months ahead of schedule.

business plan for house loan

Roughly 150,000 student loan borrowers get an email notifying them their debt has been canceled.  ( iStock )

President Joe Biden's Administration announced $1.2 billion in student loan forgiveness for qualifying borrowers enrolled in the Saving on Valuable Education (SAVE) plan, according to a White House  statement .

The move will zero out the balance for roughly 153,000 borrowers enrolled in the plan who have been making at least 10 years of payments and initially took out $12,000 or less for college. The administration is implementing this provision nearly six months ahead of schedule – it was originally scheduled for July. Borrowers who qualify will automatically have their debt discharged and will begin receiving emails from Biden this week telling them they are approved for forgiveness.  

The latest student debt discharges bring the total amount of loan forgiveness to nearly $138 billion for almost 3.9 million borrowers through more than two dozen executive actions. Student loan forgiveness has come to millions even as the  Supreme Court blocked Biden's original debt forgiveness plan  last June. The original plan would have canceled up to $10,000 in federal loans per borrower making less than $125,000 a year (couples making less than $250,000) and up to $20,000 per borrower for those who used Pell Grants in college, eliminating about $441 billion in outstanding student debt.

"As of today, we have approved loan relief for nearly 3.9 million borrowers who were counting on the Biden-Harris Administration to fix the broken student loan system and provide the forgiveness they earned and have been waiting for," U.S. Under Secretary of Education James Kvaal said. "For too long, the system did not work for borrowers, even when they were eligible for loan forgiveness. Today's announcement shows that President Biden's commitment to student debt cancelation continues to deliver."

Private student loan borrowers can't benefit from federal loan relief. But you could lower your monthly payments by refinancing to a lower interest rate. Visit Credible to speak with an expert and get your questions answered. 

BUY A HOME IN THESE STATES TO GET STUDENT LOAN DEBT RELIEF

Community college students will be debt-free sooner

Students attending community college with federal student loans and other borrowers with smaller loans could be debt-free faster than ever under SAVE. The White House said that 85% of future community college borrowers will have no federal student loan debt within 10 years. Borrowers eligible for relief just have to enroll in SAVE.

There are now 7.5 million borrowers enrolled in the SAVE Plan and 4.3 million borrowers have a $0 monthly payment. Beginning in July, undergraduate loan payments will be halved, capping a borrower's loan payment at 5% of their discretionary income.

The SAVE Plan calculates the monthly payment amount based on a borrower's income and family size, according to the Department of Education. That means that for those earning $32,800 a year or less, which translates to roughly $15 an hour, their monthly payment would drop to $0 immediately.  

The program promises at least $1,000 a year of savings for borrowers earning above that threshold compared to other Income-Driven Repayment (IDR) plans. The plan also ensures that if borrowers make their monthly payments, their balances cannot grow because of unpaid interest.

If you hold private student loans, you won't be enrolled in a federal income-driven repayment plan, but you could refinance your loans to a lower rate. Visit Credible to compare options from different lenders without affecting your credit score.

HOMEOWNERS COULD SAVE TENS OF THOUSANDS IN DAMAGES BY USING SMART DEVICES

Millions of borrowers struggle with repayments

Student loan payments resumed in October following a 42-month payment pause. While there are several avenues for relief, millions of borrowers have missed at least one payment. Some borrowers are refusing to pay in the hopes it will pressure the government to cancel their outstanding debt, a recent Intelligent.com  survey  said. 

Over one-third (36%) of borrowers who haven't made any payment said they planned to resume as soon as possible, with the same number saying they are unsure when they'll resume payments. Another 12% of these borrowers said they are using the Biden administration's 'on-ramp' to student loan repayment, in which borrowers won't face penalties like having missed payments reported to credit bureaus until September 2024. 

While most borrowers have missed payments because they can't afford them, 9% have boycotted payments to pressure the government into canceling student debt. Most of these borrowers hope their efforts will bring attention to the student loan debt conversation.

If you're having trouble making payments on your private student loans, you won't benefit from federal relief. You could consider refinancing your loans for a lower interest rate to lower your monthly payments. Visit Credible to get your personalized rate in minutes .

MORTGAGE LOAN LIMIT RISES ABOVE $1.1M AS HOME PRICES SURGE

Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at  [email protected]  and your question might be answered by Credible in our Money Expert column.

business plan for house loan

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New student loan repayment plan could make it easier for borrowers to become homeowners

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  • The Saving on a Valuable Education, or SAVE plan, can cut borrowers' monthly payments in half, and leave many people with a $0 bill.
  • Instead of paying 10% of your discretionary income a month toward your undergraduate student debt under the previous Revised Pay As You Earn Repayment Plan, or REPAYE, borrowers will be required to pay just 5% of their discretionary income.
  • Here's what to know.

A new, more affordable repayment plan for federal student loan borrowers may come with another advantage: It could make it easier to become a homeowner .

The Saving on a Valuable Education, or SAVE plan , can cut borrowers' monthly payments in half, and leave many people with a $0 bill. The Biden administration officially rolled out "the most affordable repayment plan yet" over the summer .

"Switching to a repayment plan that has a lower monthly payment can help a borrower qualify for a mortgage," said higher education expert Mark Kantrowitz.

Half of student loan borrowers — including 60% of millennial borrowers — who haven't yet purchased a home say their education debt is delaying them from doing so, according to a 2021 report by the National Association of Realtors.

Here's how the SAVE plan could soon change that, experts say.

Smaller payments can help prospective homebuyers

Your  debt-to-income ratio , which is usually calculated by dividing all your monthly debts by your monthly income, is a key factor in mortgage underwriting, said Christelle Bamona , a senior researcher at the Center for Responsible Lending.

"Those eligible for SAVE will experience reduced payments, which will in turn lower their debt-to-income ratio," Bamona said. Most borrowers should qualify for the SAVE plan as long as their loan is in good standing.

More from Personal Finance: 'Loud budgeting' is having a moment Gen Z, millennials want to invest — but many aren't Americans can't pay an unexpected $1,000 expense

Borrowers making payments on their student debt who enroll in SAVE could see their ratio fall somewhere between 1.5% to 3.6%, according to a new report by the Center for Responsible Lending.

Here's how that happens.

For one, the SAVE plan increases the income exempted from your payment calculation to 225% of the poverty line, from 150%. As a result, the first roughly $33,000 of your income won't be factored into your monthly obligation, up from around $23,000 on the other income-driven repayment plans. These numbers represent single individuals. More income is protected as family size increases.

Starting in July, an even bigger perk of the plan will be available.

Instead of paying 10% of your discretionary income a month toward your undergraduate student debt under the previous Revised Pay As You Earn Repayment Plan, or  REPAYE , borrowers will be required to pay just 5% of their discretionary income. The SAVE plan has replaced REPAYE.

Kantrowitz provided some examples of how much borrowers could see their bills drop.

Previously, someone who made $40,000 a year would have a monthly student loan payment of around $151. Under the SAVE plan, their payment would fall to $30.

Similarly, someone who earned $90,000 a year could see their monthly payments shrink to $238 from $568, Kantrowitz said.

How Wall Street trades student loans

In the past, most mortgage lenders assumed that a borrower's monthly student loan payment was a certain percentage of their loan balance, even if the actual payment was lower, Kantrowitz said.

Fortunately, he said, "They now base it on the actual loan payment ."

There's one catch: Many mortgage lenders won't use a $0 monthly student loan payment in their underwriting process, which the SAVE plan could leave many borrowers with. In such cases, lenders may still calculate your monthly obligation as a share of your total debt.

The Center for Responsible Lending wants to see this change.

"By not counting their monthly payments as $0 in the underwriting process, lenders are artificially inflating consumers' monthly debt obligation," Bamona said. This could potentially prevent millions of low-income Americans from getting a mortgage, she added.

Saving for a down payment may be easier under SAVE

The SAVE plan may also help more people get in financial shape to buy a house, experts say. That's because a smaller monthly payment could enable them to direct more cash to their savings, and reach their down payment goal faster.

Student loan borrowers who are first-time homebuyers may also be eligible for financial assistance , Bamona said, and should research their options.

"Grants or down-payment assistance programs may be accessible to first-time homebuyers, provided by agencies and organizations within their state or municipality," she added. Don't miss these stories from CNBC PRO:

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