As a mortgage broker, you know the importance of staying on top of the financial metrics of your business.
From loan origination to loan servicing, your success depends on having a clear understanding of the key performance indicators (KPIs) that will determine the success of your loan business.
While the concept of KPIs can be intimidating, they are essential for any broker's business seeking to maximize its success. KPIs provide a clear picture of where you stand in the mortgage market, allowing you to measure your progress and identify areas of opportunity.
We’ll start by examining the most crucial metric of all: how many loans does the average loan officer close? We’ll then explore average loan size, average compensation percentage, the average time to close, and the average type of loan. Finally, we’ll review the best ways to check loan officer production numbers and how to improve your mortgage lending KPIs.
What Are the Key Performance Indicators (KPIs) for Mortgage Lending?
When trying to understand mortgage lending KPIs, there are five primary metrics you should be tracking. These metrics are:
- How many loans does the average loan officer close?
- Average loan size
- Average compensation percentage
- Average time to close
- Average type of loan (purchase, refinance, conventional, FHA, VA, etc.)
These five metrics are essential for any mortgage broker seeking to optimize their business. By understanding each one, you can better understand your loan business and identify areas for improvement.
KPI: How Many Loans Does the Average Loan Officer Close?
The first KPI to understand is how many loans the average loan officer closes.
This metric measures the loan officer’s productivity and provides a good indication of their performance in terms of volume.
Loan origination is the process of originating a loan and submitting it to the lender for approval. On average, loan officers will typically close between 5 and 10 loans per month.
This number can vary greatly depending on the loan officer’s portfolio size, experience level, and market conditions. This metric can also widely vary depending on the loan officer's lead pool, professional relationships, and more.
Understanding the number of loans an average loan officer may close allows you to track their performance from a volume perspective. This can influence sales goals, allowing your mortgage brokerage to predict income more accurately in the future.
KPI: Average Loan Size
The second KPI to understand is your brokerage's average loan size.
This metric tells you the average loan size for each loan an officer closes. Average loan size is an important metric to track because it can indicate the loan officer’s success in finding larger loans.
Larger loans are more profitable and will help boost the loan officer’s overall compensation.
The average loan size varies greatly depending on the market conditions and the loan officer’s experience level. Understanding your average loan size coupled with your average loan volume can help you predict the volume of your origination over time.
KPI: Average Compensation Percentage
The third KPI to understand is the average compensation percentage.
This metric measures the average compensation that a loan officer earns for each loan they close.
As always, average compensation percentage can vary greatly depending on the loan officer’s experience level, the loan size, and the market conditions.
On average, loan officers typically earn a commission of around 2% of the loan amount. This percentage can be higher or lower depending on the loan officer’s experience level and the loan size.
Combining your average number of loans closed each month and understanding the average volume of each loan can allow you to accurately measure and predict the future compensation of your loan officers. By calculating the number of loans they'll close each month multiplied their average compensation percentage, you can clearly understand each loan officer's projected income.
KPI: Average Time to Close
Average time to close is a metric that measures the average time it takes for a loan to be approved and closed.
On average, loan officers will typically close loans in 30 days. This number can be higher or lower depending on the loan size, the loan officer’s experience level, and the market conditions.
Average time to close can be incredibly valuable in evaluating your brokerage's pull-through rate or the ability of a loan officer to close a transaction. Mortgage pull through rates can be calculated by understanding the total number of funded loans divided by the total number of applications multiplied by 100.
If your brokerage has funded 10 loans and received 100 applications, your pull-through rate is 10%. With an average time to close of 30 days, you can measure and predict your rate of closings with precision and accuracy.
KPI: Average Type of Loan (Purchase, Refinance, Conventional, FHA, VA)
Understanding the average type of loans that you're closing can help mortgage brokers evaluate which areas of the market to focus on.
When interest rates are particularly low, refinance business tends to pick up. When interest rates drop, refinances do to.
Perhaps your brokerage focuses primarily on VA loans - identifying this niche can help you double down on the areas in which your business is already excelling to produce more.
How to Check Loan Officer Production Numbers
Checking loan officer production numbers is essential for any mortgage broker seeking to maximize their success.
There are several ways to check loan officer production numbers. The most common methods include tracking the loan officer’s origination numbers every month, the loan officer’s average loan size and percentage of loans closed, and the loan officer’s average type of loan.
The best way to track loan officer production numbers is to use a loan origination system (LOS). LOS platforms allow mortgage brokers to track loan officer production numbers in real-time. A LOS is essential for any mortgage broker seeking to get the most out of their loan officers.
How to Improve Mortgage Lending KPIs
Improving your mortgage lending KPIs is essential for any mortgage broker hoping to grow their business meaningfully.
The best way to improve your mortgage lending KPIs is to focus on identifying trends and areas of potential focus. If your business is primarily composed of refinances and you begin to enter into a purchase-based market, you'll have an opportunity to refocus your efforts quickly.
It's vital to ensure that loan officers are closing loans promptly. This can be done by ensuring that loan officers are adequately trained, that the loan process is streamlined and efficient, and that the loan officer is incentivized correctly.
Don't Go it Alone
Understanding the five KPIs every mortgage broker needs is essential for any loan business seeking to maximize their success.
By understanding how many loans the average loan officer closes, the average loan size, average compensation percentage, the average time to close, and the average type of loan, you can better understand your loan business and identify growth areas.
Additionally, by checking loan officer production numbers and improving your mortgage lending KPIs, you can ensure that your loan business is successful.
Working with a financial coach can allow you to track your KPIs and discover new areas of improvement. A financial coach can provide the guidance and expertise you need to make informed decisions about your loan business.
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