Understanding and measuring relevant key performance indicators (KPIs) can help you optimize your mortgage business and improve your bottom line. One of the most notable metrics to track is your mortgage pull-through rate, also known as a loan application conversion rate.
By keeping a close eye on this number, you can address activities that waste time and money and proactively make other critical changes. The following guide explains how to calculate your pull-through rates and discusses some of the top strategies for improvement.
What is a Pull-Through Rate in Mortgage Lending?
A mortgage pull-through rate is a calculation that measures the number of loan applications that are closed and funded by the lender versus the total number of formally submitted loan applications over a set period of time. This is a good indication of your company’s efficiency and can also reflect the effectiveness of your customer service and other internal processes.
How Do You Calculate Mortgage Pull-Through Rate?
To calculate this important mortgage KPI, divide the number of mortgage loans closed and funded over a time period by the number of loan applications formally submitted over the same time period. Then, multiply the result by 100 to convert it to a percentage rate.
For example, if you had 100 applications submitted over the past three months and 70 were funded, your pull-through rate is 70%. Or, in contrast, your “fall out rate” is 30%.
When determining the number of formally submitted applications, it’s essential to include all applications that are completed in full and submitted to the institution, regardless of the channel used for submission. Also, applications for new mortgages and refinances are included, while those for modifications or home equity lines of credit are not.
When defining the number of closed loans, note that the calculation only includes loans that the institution has funded. If the loan isn’t yet formally closed, it should not be included.
How Does the Mortgage Pull-Through Rate Affect Mortgage Companies?
Lower-than-average pull-through rates cause loan officers and other staff members to spend their time on excessively low-value work. This negatively impacts your overall production and is a good indication of a problem somewhere in your organization. Luckily, analyzing your data can often help you pinpoint the cause of the issue so you can work on resolving it.
Why Do Mortgage Borrowers Fallout?
Many factors may cause a borrower to fall out. A “hard fall out” occurs when the borrower cancels their loan application. In some cases, they may decide not to take out a loan or take their business to another lender.
Some of the factors that commonly lead to hard fallouts include:
- Extended timelines for data collection, underwriting, closing, etc.
- Failure to keep the borrower informed of their loan status
- Excessive underwriting process
- Lack of borrower incentives and/or competitive rates
Soft fallouts are typically caused by a change in loan terms that negatively impact a lender’s ability to close the loan. This often happens due to rate renegotiations, and this type of fallout may be more challenging to avoid.
Generally, borrowers submitting refinancing applications are more likely to fall out than purchase applicants since they are often only trying to improve their interest rates. Mortgage referrals can also be a key to minimizing fallout. Purchase applicants referred by their real estate agent or other trusted professional are less likely to fall out than non-referred borrowers.
Reducing your fallout rates is one of the keys to improving your mortgage business. For more tips to help you become a top-producing loan officer, take a look at our 10 Secrets to Success.
3 Proven Strategies to Improve Your Pipeline Pull-Through Rate
The further an applicant gets in the loan process, the less likely they are to fall out. As they move through the process and invest more time and money, they’re more likely to go to closing with the original lender. To this end, keeping a borrower engaged in the process at least until they pay the appraisal fee can significantly improve your pull-through rate.
Streamlining your application process, ensuring stellar communication, and creating a personal connection with borrowers are all effective methods for improving your pull-through rates. Here’s a closer look at some of these strategies.
1. Qualify Your Leads
Pre-qualifying your mortgage leads early in the process will help you avoid spending unnecessary time processing applications for borrowers who are likely to be rejected by the lender. During this process, it’s also vital to educate borrowers to make informed decisions. This can make it less likely that they will drop out further down the line.
2. Communicate with Customers Every Step of the Way
Transparency throughout the lending process will help borrowers feel more comfortable. They’re less likely to walk away if they understand what has already happened and each upcoming step.
A drip email marketing campaign can also automate post-close communications. This helps establish a long-term relationship, making it more likely that the borrower will return to you for future financing needs. Having a solid connection with returning clients also helps reduce the possibility of future fallout.
3. Streamline Your Application Process
While it’s critical to gather all of the necessary documentation from borrowers, they’re more likely to pursue other options if the process is too much of a hassle. A streamlined mortgage document management system and the ability for borrowers to easily complete paperwork online can significantly improve your loan closing rates.
Allowing borrowers access to an online platform where they can easily see pending items and track their application process will also provide a sense of empowerment and reduce the likelihood of fallout.