If you are a commission-based loan originator, you are likely paid a percentage (50 basis points, 80 basis points, 150 basis points, etc.) of the loan amounts you close. That being the case, by raising your average loan amount you create an opportunity to make more money writing the same amount of business. Even producing fewer loans going forward with higher loan amounts may increase your annual income by 10%, 25% or more. This sounds almost too good to be true. Is this feasible?
The short answer is yes. Many mortgage originators have figured out how to up their average loan amount and earn bigger commission checks each month without funding more units. It’s not by accident, but by design. If you’d like to follow in their footsteps, here are six solid ways to make that work:
1. Shift your focus to doing more home purchase mortgage business. Purchase loans typically contain higher loan amounts than do refinance loans. While this is not true in every case, it is true overall.
By turning your attention to finding and originating more purchase loans, you can allot yourself an automatic raise without adding more units to your pipeline. What’s more, purchase loans typically have a higher propensity to close then do refi deals, since purchase transactions are tied to a legal and binding sales contract.
That means you’ll actually get paid on the applications you take and the work you do, and that’s a good thing.
2. You can target builder business. Mortgages for newly constructed homes have an average balance about 15% more in today’s market than mortgages on existing properties.
If you have the products builders and their clients want (construction to permanent financing, extended locks, etc.) and the expertise in your shop’s back office for this type of business, working with builders and helping their buyers can grow your loan amounts and your income by an average of 15% on every deal.
New construction in this country is making a comeback with more than 75,000 new housing starts every month. Consider capitalizing on the “reboom” in builder business.
3. Offer low-down-payment programs. It is simple math — you make more on a $200,000 home purchase with a 3% down mortgage than you do if the borrower puts down 10%.
If your market is predominately a first-time buyer market (and only if the program makes sense for the customer) don’t ignore this option.
Learn about reduced down payment programs through your company, your wholesale lender or your private mortgage insurance rep, and how low down payment programs can help make more deals happen.
You may be able to earn slightly bigger commissions on those slightly smaller loans.
4. Sell different loan products. Originator A is out talking up community reinvestment products, state housing programs and Federal Housing Administration loans. Originator B is out talking up conforming conventional programs and jumbo financing. Who do you think will end up with higher loan amounts and commissions?
Mortgage products are designed for different borrowers and various price points on a broad scale. Simply stated, this means when you market higher price point products you’ll originate more loans with higher loan amounts, and make more money doing so.
5. Switch your territory. Every real estate market is incredibly diverse. One section of town will showcase $300,000 to $400,000 homes for sale, and just a few miles away the average property will go for less than half of that. A quick look at your market will reveal this assumption to be true.
Just by moving your sales, marketing and networking efforts a short distance and calling on real estate agents who sell in those higher-priced areas, you can increase your average transaction amount by $50,000, $100,000 or more.
Question: What would it mean to you financially to add $100,000 to your average loan amount?
6. Align with strategic referral partners. Some originators have done an outstanding job forming alliances with certified public accountants, financial planners and financial advisors to be their referral partners.
Think about it — the type of consumer who’s going to have a CPA, financial advisor or financial planner is likely one of affluence, and someone that when it comes to buying a home is going to spend some serious money. Those referrals are typically big ticket loans for solid and well-qualified clients.
Loan originators have been taught that if you want to make more money, you need to produce more loans.
While writing more loans is one excellent way to increase your earnings, it is not the only way.
Doug Smith is a nationally known industry speaker, author and sales trainer. For more information, please visit www.DougSmithOnline.com or call Douglas Smith & Associates at 877-430-2329.