The pull-through rate is a term primarily used in mortgage banking, and it refers to the percentage of loan applications that are ultimately closed and funded. The pull-through rate is an important metric that lenders use to assess their efficiency and effectiveness in converting applications into actual loans.
This rate can be influenced by various factors, including the quality of the loan applications, the efficiency of the underwriting process, market conditions, and the lender’s own internal practices and policies. A low pull-through rate can indicate inefficiencies in the process or issues with the quality of the applications.
For example, if a mortgage bank received 100 loan applications in a month and was able to close and fund 75 of those loans, the pull-through rate for that month would be 75%. This means that the mortgage bank was able to convert 75% of the applications into actual loans, while 25% of the applications were not funded for various reasons (e.g., the applicant withdrew the application, the application was denied, or the applicant didn’t complete the process).
Example of the Pull-Through Rate
Let’s consider a scenario with a mortgage lender named “FastTrack Mortgages”.
In the month of January, FastTrack Mortgages received 200 mortgage loan applications. By the end of February, they were able to successfully process and close 160 of these applications.
The pull-through rate is calculated as the number of loans closed and funded divided by the total number of applications, then multiplied by 100 to get the percentage.
So, the pull-through rate for FastTrack Mortgages in this case would be calculated as:
Pull-through rate = (Number of Loans Closed / Number of Applications) * 100
= (160 / 200) * 100
This means that FastTrack Mortgages has a pull-through rate of 80% for the month of January. In other words, they were successful in closing 80% of the loan applications they received. The remaining 20% of applications might have been denied, withdrawn by the applicants, or still in the process.
This 80% pull-through rate indicates the effectiveness of FastTrack Mortgages in converting applications into actual loans. If this rate is significantly lower in future periods, it might be a signal that the company needs to investigate potential issues in their loan approval and closing process.