Should You Buy Mortgage Leads for Your Business?

Online mortgage leads are a powerful and unique tool that mortgage loan officers can
use to have a predictable return on their marketing dollars. However, they're not for
everyone. Working internet leads takes tact, patience, and a willingness to remain
subjective about the data when it feels like nothing is going right.

The Good and Bad of Working
Mortgage Leads

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Bad:

Quality Mortgage Lead Sources
are Hard to Find and Even Harder
to Identify

Generating mortgage leads is a very tricky science, even for the most experienced of marketers. There are not very many products out there like it! Think about it: Everyone wants to buy a house at some point. It's the "American Dream". However, there are only select people at select points in their lives that are in the market to buy a home.

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This leads us to another part of the mortgage marketing challenge. There is a lot of money to be made in originating mortgages, which makes it an extremely competitive landscape. This forces those companies that want to generate quality mortgage leads to walk a line between making your ads enticing enough to get engagement without being so enticing that people engage too far outside their purchase window. Most marketing companies don't understand this dichotomy, and think "a lead is a lead". However, the lead's original intent is very important to understand. What was the intent of the person inquiring when they left their information? That's ultimately what determines the quality of a mortgage lead.

Good:

Mortgage Leads are a Scalable Way to Build Your Business When Worked Correctly

When it comes to scaling a business quickly, a few things go really, really far: solid systems, processes, and technology as well as a consistent and predictable source of business. Online mortgage leads can be a solid foundation for both. The thing about working internet leads is that it's all about statistical averages. Put another way, it's a numbers game. Let's say you close an average of 1 out of every 33 leads you receive/generate.

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As long as you can obtain 33 leads at a cost that is at least half of what you make on your average closed loan, and you can continue to buy as many leads as you want, why wouldn't you? You need time to work the leads. That's where systems/processes/technology comes into play. Technology today makes it easy to identify the 25% or so of the leads that are actually worth your time, energy, and attention. So in the example above, instead of working with 33 leads to get 1 closed loan, you could only be talking to 8 of those leads to get your 1 closed loan. Obviously, this makes working mortgage leads much more appealing.

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Bad:

Even Quality Mortgage Leads Aren't Very Good Compared to Other Business Sources

The number one thing for mortgage loan officers to understand prior to working online mortgage leads is this: People do not go to Google to search for a mortgage loan officer to talk to. They go online and search to get their questions answered. This is important to wrap your head around because when most people hear that mortgage leads convert at an average of 2-3%, they don't fully comprehend what that number means.

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That means 97-98% of the people who fill out a lead form including name, email, phone number, and the other questions they answer, will not convert into a closed loan for the loan officer who bought or generated the lead. You just have to figure at least half of the leads that you receive won't pick up the phone. Of those, probably half of the ones that do won't be worth anything and you'll find out in your first conversation with them. That's a lot of people to talk to and files to touch when compared to a source like inbound calls generated from a direct mail campaign, or realtor referrals. And yet, working mortgage leads still makes a ton of sense.

Good:

Marketing Online Is a Great
Way for Loan Officers to Get
to Borrowers BEFORE They
Talk to an Agent

When former loan officer Michael McAllister built his lead generation system that ultimately became the Empower Funnels service, he did it because he had a very common challenge. He hated chasing real estate agents and asking for business. Within months of launching his first campaigns, Michael was firing agents he didn't want to work with because he was able to take CONTROL of his relationships by referring out over half of his closed loans to real estate agents.

If you can find a lead source that gives you that kind of access to unattached buyers, you'll be in the driver's seat in your business for a long time. We have a saying here at Empower: "If you control the leads, you control everything." If you have a steady source of inbound mortgage leads from a consumer direct channel, you don't need to be the loan officer that answers the phone at every hour of the night and weekend or has the cheapest interest rates. Your value proposition becomes impossible to ignore when you're able to send deals regularly to the agents you want to work with.

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Bad:

Mortgage Leads Can Be More
Time/Work Invested Than
They're Worth

Obviously when you think about mortgage leads only converting at a 2-3% rate, you need to make sure you're getting the leads at a cost that's scalable. This is what made Facebook Ads so popular, despite the fact that they're absolutely horrible for generating mortgage leads. Loan officers were generating "leads" at $1-2 a lead. This gives the illusion that you can't lose, since even a .5% conversion rate results in a $400 cost per closed loan at worst. When you consider our clients expect to be anywhere between $500-$1000 per closed loan, this number looks very appealing.

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However, what many loan officers failed to account for was the time necessary to find that needle in the haystack of terrible mortgage leads. Anytime you're evaluating the efficacy of a marketing campaign, you need to factor in the amount of time you'll need to invest as a loan officer to get to the point of submission to underwriting. Calculate your hourly rate by taking your last 12 months of income, and dividing it by 2080. Then use that number as a universal figure when calculating your cost per closed loan across mortgage marketing campaigns. Luckily, there are sources of mortgage leads with much more intent than from Facebook Ads, and there are proven systems and technology to reduce your time spent her closed loan to be similar to that of your best marketing campaigns.

Good:

Mortgage Leads Help You Build Your Most Valuable Business Asset: Your Database

One of the things we at Empower believe is that we generate leads so that someday you don't have to anymore. What exactly does that mean? Well, every time you get a mortgage lead what you're actually getting is consent. Consent to market to them on a fairly intimate level, many times using their personal cell phone and email address. Many loan officers don't use this to their full advantage, but we pride ourselves on helping our clients maximize the value of their leads.

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If you generate a high volume of leads on a monthly basis, and you continue to keep in contact with those leads via email and text messages on a regular basis, you have a captive audience for building your brand. Sure, some even many of those leads will unsubscribe, but most of the people that will consume your content will do so quietly like a fly on the wall for months or even years before they finally reach out and thank you for staying in contact all that time by using you for their home loan. Between the leads you don't close, the leads you do close, and the referrals you solicit from the leads you do and don't close, buying/generating mortgage leads for a few years can be the foundation of a lifelong referral-based mortgage business.

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Mortgage Leads FAQ w/ Founder
Michael McAllister

How much do mortgage leads cost?

Mortgage lead costs vary widely in price depending on factors like purchase vs refinance, exclusivity, minimum commitment, age of a lead, and a lot of the times the attributes of the lead like self-reported credit score, income, purchase price, and zip code. We've seen lead costs range anywhere from $5 for an exclusive purchase lead generated on Facebook to $100 for an exclusive purchase lead generated on Zillow in some markets. The most important number to keep an eye on is your cost per closed loan. Just be sure to factor your time into the cost equation!

Is it compliant to share the cost of mortgage leads with a real estate agent?

This is a very legally grey area depending on who's in charge of the CFPB and who they're enforcing against. The short answer, in our opinion (although we're not attorneys and you should consult one if you're concerned) is it can be when done correctly. To the best of our understanding, co-marketing is done correctly when the access to the leads and costs are shared in direct proportion to the amount each party is being advertised. So if the lead is inquiring about homes for sale and the lender never works those leads, just expects every referral from the campaign to come through them, that would be non-compliant. But if an agent shares a landing page with a loan officer 50/50, and they split the cost of the advertisements 50/50, and they share responsibility for working the leads, it can be considered compliant.

What is a mortgage trigger lead?

A mortgage trigger lead is a lead sold by one of the 3 major credit bureaus, in real-time as they're applying for a mortgage. Lenders across the country have contracts in place to purchase these leads at a predetermined price, and they follow up sometimes dishonestly representing themselves as a representative of the company they're already working with. Trigger leads can be a great source of business with the right systems in place. However, they should be navigated carefully to avoid questions of privacy and integrity concerns.

Can I generate my own mortgage leads online?

YES you can! However, it is our goal and the goal of marketing companies across the country to create services so valuable that it doesn't make sense for you to do it yourself. If you have a knack for marketing, and you're highly interested in it, then I say go for it! However, if you're just trying to save some money so you can spend every dollar possible on ad spend, I would rethink your strategy. The right mortgage marketing partner is worth their weight in gold, and will never be a true cost as they will continuously add to your pipeline.

Is there such a thing as free mortgage leads? How do I find free mortgage leads?

Sure there are. Anyone you talk to that expresses future interest in a mortgage is a mortgage lead. So free mortgage leads are just organic interactions that result in a business conversation. One way to do this is through social media. Never before have we been able to make acquaintances so quickly, and find people of similar interests so easily. By being active on social media, engaging in Facebook groups, using hashtags, following/friending local strangers with mutual friends, you can accomplish a lot of organic outreach/mortgage lead generation in a short amount of time. Granted, this is not a fun or easy way to grow your mortgage business. It is, however, the best option for some loan officers whether you're just getting started or have been in the business for years.

How can I tell how my mortgage leads are being generated?

ASK YOUR LEAD VENDOR. Seriously. If they won't/can't answer this question, you need to walk away as soon as possible. There is nothing secret or a mystery about generating mortgage leads. If a lead vendor won't tell you how they're generating your leads or you can't verify it for yourself (what channel, what offer, landing page messaging, etc), it means they're hiding something.

Do you recommend loan officers avoid Facebook altogether?

No no no! Facebook is a great tool for branding yourself and staying in touch with your database. You can even use it as a way to market to realtors, possibly even through paid ads. It's just a terrible place to generate leads for prospective homebuyers because of the inherent lack of ability to filter in your targeting and the amount of intent that is necessary to actually buy a home even if you think it's a good idea (which everybody does). 

Why are refinance mortgage leads more expensive to generate?

The highest quality online mortgage leads that are generated are generated from Google Search traffic. This is where you're able to pinpoint intent to ensure you're talking to the right leads at the right time. However, with refinance mortgage leads, most people who refinance never get to a point of searching for information online besides current mortgage rates. The problem with that is that it's a race to the bottom, and unless you're a broker you don't have multiple rates to display on a rate table which will make it really hard to get someone to give you their information (what's in it for them?). You can generate refinance leads in a multitude of other ways that inquire targeting people based on the endless amounts of homeowner/mortgagor data available. Because homeowners are so aggressively targeted with refinancing solicitations, there's a lot less search traffic, which drives the cost per lead up and makes it more difficult overall to generate them.

Is buying shared mortgage leads a bad idea?

Honestly? Probably. I wouldn't ever buy shared purchase leads because purchase leads are hard enough to convert without having to worry about how many other lenders are preapproving the same borrower. As for how refinances go, Quicken Loans is still the number one purchaser of internet mortgage leads by a mile, and their technology platform is so locked down that they're connected with the borrower by the time you even know you have a lead. It's not exactly a fair fight. I'd stick to leads where you're contractually guaranteed at least a period of exclusivity.

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