Turning Loan Prospects Into Borrowers

BLOG VIEW: According to the National Survey of Mortgage Brokers (NSMB), about 50% of borrowers seriously considered more than one lender before choosing where to apply for their loan.

First-time home buyers were slightly more likely than repeat buyers to shop around for a lender. Twenty-three percent of borrowers applied to more than one lender. Most of these multiple-application borrowers (80%) were searching for better loan terms. Thirty-five percent reported concerns over whether they’d qualify for a loan, while 20% had been turned down on a previous application.

What steps can lenders take to convert these shop-around prospects into borrowers?

Educate your prospects

With its plethora of loan products, unfamiliar jargon and complicated forms, the mortgage application process can be intimidating, particularly for first-time buyers. Consumers rely heavily on lenders for information about mortgages. Lenders and mortgage brokers can play a significant role in helping determine the type of mortgage the consumer chooses.

The NSMB found that up to 70% of borrowers choose their lender or broker before deciding on the type of loan. Lenders can clarify the process and assist in loan product selection by defining terms and explaining the pros and cons of various loan products.

One way to get a borrower started is to use a mortgage calculator to help applicants find the best loan products and rates. Mortgage comparison calculators allow side-by-side comparisons of fixed-rate and multiple-rate loans and produce amortization schedules for borrowers. Affordability analysis calculators tell applicants how much they can afford. Debt consolidation, refinance and rent vs. buy calculators help borrowers make wise financial decisions.

Communicate regularly

Nurturing the relationship can be crucial for turning prospects into customers. A customer relationship management (CRM) system can automatically send regular emails to one’s prospects.

One can automatically email prospects to keep them apprised of changes in interest rates, contacting them when the interest rate drops below that person’s particular threshold. A CRM system can track whether prospects open system-generated emails, so loan officers can follow up with interested parties right away.

Make it convenient to apply

In today’s digital, I-want-it-now age, borrowers want the mortgage process to be quick, easy and transparent. According to one survey, 54% of home buyers completed their mortgage application online. More than 70% submitted at least some supporting documents to the lender via email, an app or a website.

Potential borrowers should be able to apply for their mortgage online, attaching supporting documentation to their application. Today’s loan origination platforms provide tools that let loan originators proactively follow up with borrowers who have started an application but not yet submitted it, and even take over the application to assist the borrower in completing it. An added plus is when this loan origination software provides timely status updates and allows borrowers to view their initial disclosures online.

Provide exceptional customer service

Although technology plays a critical role in a speedy mortgage application process, human relationships are still the most important ingredient for converting prospects into customers. Therefore, lenders need to set themselves apart from their competitors.

One way to accomplish this is to respond faster. Consumers expect prompt responses to their questions and requests for assistance. If a lender is fortunate enough to have other financial relationships with the consumer, he or she should not lose out on the opportunity to engage them to make the whole experience more personal.

Existing products, whether depository accounts, credit cards or other types of loans, provide additional insight into a consumer’s finances. Lenders should take advantage of the opportunity.

Lenders should also get to know their prospects and their unique needs. Are they first-time home buyers? Is their credit less than stellar? Lenders should ask prospects if they’re looking for a specific loan type, like Veteran Affairs, U.S. Department of Agriculture or Federal Housing Administration. The lender should then highlight the personal experience with similar borrowers, telling prospects how it can help them meet their individual needs. First-time home buyers may need more education and guidance than more seasoned applicants.

Educate your turn-downs

Instead of just turning away unqualified prospects, lenders should help them improve their credit so they can qualify for a loan in the future. Even if it takes them several months to raise their credit score, the grateful applicants may refer their friends and family to the lender in the meantime.

Lenders should offer solutions and resources to help potential borrowers build good credit, such as including links to free credit-building articles and other resources. These educational materials can live on the lender’s website and can be distributed via social media posts. Lenders can post “tips of the day” about building good credit, explain what lenders are looking for on a mortgage application, and explain how to obtain the lowest interest rates.

Other things lenders can do to help potential borrowers build good credit include the following:

  • Provide a checklist of information needed to complete an URLA;
  • Offer a free consultation about applying for a mortgage loan; and
  • Hold free seminars about how to qualify for a mortgage loan or how to raise your credit score

Lenders can successfully convert applicants into borrowers by setting themselves apart from the competition. Utilizing technology to provide timely status updates, offering educational resources, and developing a personal relationship can foster a positive customer experience that helps lenders retain satisfied borrowers for future transactions.

Susan Graham is president and chief operating officer of Financial Industry Computer Systems Inc. (FICS), offering mortgage origination and mortgage servicing software to mortgage lenders, midsized banks and credit unions.

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