We’ve all heard an LO saying with great pride, “90% of my closings are purchase deals and not refi’s…” like that’s some badge of honor…
… in reality, THAT IS A HUGE MISTAKE!!!
Now, I get it, the reason so many want to use that as their victory chant is because what they are really saying is “whether rates go up or down, people still buy houses and my mortgage business is stable and not reliant on refi’s and dropping rates”…
And that’s somewhat true, but it has a huge flaw that is likely costing them tens of thousands of $$$ PER MONTH, and they don’t even know it. Read on..
I have found the most “healthy & stable” ratio is 70% purchase and 30% refinance.
If we are refi heavy, doing more refinances than purchases, they are right, when rates go up, these cats fall off the highway faster than a 1971 Ford Pinto on bald tires.
And the real problem with that is, now these LOs which have been ignoring Realtor relationships for purchase referrals, all of the sudden they are starting from scratch and trying to establish relationships, which doesn’t help them with closings this month..
Here’s the thing though, if we are purchase heavy, like the LO boasting they are at 90% purchase, that means they are not farming their own past database for refinance opportunities…
This has 2 problems.
#1 We have the moral obligation to help our past clients when it’s in their best interest to refinance and they just haven’t been made aware of this opportunity (our fault).
#2 We would be missing out on these closings which can add up HUGE when it comes time to the $$$ we make each month.
Last year, my mortgage team ended up closing about 68% purchase and 32% refi’s, very very close to the “Holy Grail” 70% purchase / 30% refi.
Earlier in the year, if we see that we are trending purchase heavy, more than 71% purchase, then we know we need to up our game with marketing to our past database (and / or friends and family if you are new to the business).
If we see that we are refi heavy, more than 31% refi, then we know we need to step up our game on our referral partner marketing, which is actually pretty easy.
So using that matrix, whether rates go up or down has never really had an effect on our growth.
We’ve grown every year.
Always remember that with the refi’s, a lot of our people aren’t refinancing to get a better rate necessarily…
…they are doing it for cash out debt consolidations, to cancel mortgage insurance, perhaps getting somebody off the deed, maybe to cash out to buy a 2nd home or investment property(s), really any number of reasons.
But we don’t know how we can help them if we don’t call them, with a very simple phone script (that I’m happy to share with you), to check in and see what opportunities there are for us to help them (and make a commission check when we do).
So take a few minutes to see where your ratio was at last year, and then decide what to focus on first, marketing to your database (if you are over 70% purchase), or to focus on referral partner relationships (if you are over 30% refi).
Let me know what you find.