There are many mortgage lenders out there, but there are two basic types: retail and wholesale. Retail lenders work directly with individual borrowers, but wholesale mortgage lenders do not.
Wholesale mortgage lenders provide mortgages through third parties, such as banks, credit unions, or other lenders. They may also partner with mortgage brokers. Mortgage brokers prepare applications to work with individuals to find the right loan (sometimes at a discounted rate).
For wholesale lending, you know here what you would expect if you borrow money from a wholesale sales lender.
Wholesale Mortgage Loan System
With wholesale lending, borrowers are usually not in direct contact with the company that sets up money and sets the fees and terms of the loan. Instead, the borrower will interact with another financial institution or expert. This third party will facilitate borrower applications and are contacted throughout the loan underwriting process.
Wholesalers also technically own mortgages. And when the loan is closed, wholesale lenders usually sell it in the secondary mortgage market to fund more mortgages.
As they don’t pay for extensive advertising or hire customer reps, wholesale mortgage lenders often offer competitive rates and have more flexible loan options and requirements than retail lenders.
Wholesale vs Retail Mortgage Lenders
These are the big differences between wholesalers and retail mortgage lenders.
- A middleman is required: Wholesale lenders do not treat borrowers directly. They work behind the fundraising scene. In contrast, retail lenders connect directly with borrowers. Perhaps their ads will be displayed and can be applied directly through their website.
- Limited mortgage options: Wholesale lenders usually have rather narrow mortgage offers. However, when working with retail lenders such as banks and credit unions, borrowers can usually choose from multiple mortgage products undertaken, maintained and funded by the lender.
- There are few additional financial products: Wholesale mortgage lenders focus solely on mortgages. Retail lenders tend to also offer other financial products, such as credit lines, checking accounts and business loans.
The role of mortgage brokers in wholesale lending
If you’re interested in a simple comparison shopping and have someone introduce you to the lending process, the mortgage broker and wholesale route might be perfect for you.
Mortgage brokers usually have existing relationships with wholesale lenders. They act in a way as lenders’ loan officers. Brokers help you complete your application. Once submitted for approval, the broker coordinates with the wholesale lender’s underwriting team.
By shopping for your information in the wholesale lender’s contact information, brokers may be able to obtain more competitive rates and terms than finding mortgage shopping independently. Often they present several options and help you decide between them.
Wholesale Mortgage Loan Process
The process of applying for a mortgage through a wholesale lender is similar to applying for one through a retail lender. The main difference is that the broker is a contact throughout the process. Here’s what you can expect:
- Step 1: Collect the required documents and connect with your mortgage broker to complete your loan application.
- Step 2: The mortgage broker will submit your application to a wholesale lender.
- Step 3: Members of the Wholesale Lenders Underwriting Team analyze and verify the information on your loan application and make lending decisions.
- Step 4: If the application is approved, the mortgage broker will provide a commitment letter from the wholesale lender detailing the terms of the loan and applicable terms.
- Step 5: Mortgage brokers coordinate with wholesale lenders to close their mortgage. The broker will notify you if there are any conditions that must be met to confirm your mortgage.
- Step 6: Once all conditions are met, the wholesale lender will issue a “Clear to Close” to the mortgage broker who will pass the information to you. Funds for down payment and closing costs (if applicable, if applicable, send to the title company shortly before closing.
- Step 7: At closing, you sign a loan document to confirm the end of the transaction.
- Step 8: Wholesale lenders fund mortgages.
Pros and cons of wholesale mortgage lending
If you are considering a wholesale mortgage, keep these advantages and disadvantages in mind.
Top Wholesale Mortgage Lenders of 2024
This is the 10 US lenders with the most wholesale mortgage business as of 2024. They are ranked by the amount of dollars in wholesale mortgage operations. Please note that some are retailers too.
| Lender | Wholesale volume (billions) | % of business that is wholesale |
|---|---|---|
| United Wholesale Home Loans | $108.26 | 100 |
| Pennymac | $8.13 | 7 |
| New Les | $4.79 | 12 |
| Plaza Home Home Loan | $3.73 | 49 |
| Loan Stream Home Loan | $3.56 | 89 |
| Kind Lending LLC | $3.5 | 92 |
| Paramount Residential Mortgage Group | $3.17 | 39 |
| Fairway Mortgage Corp. | $2.5 | 8 |
| A&D Mortgage LLC | $2.2 | 90 |
| CMG Finance | $2.1 | 8 |
| sauce: Scots Guide |
How to Choose a Wholesale Mortgage Company
When choosing a wholesale mortgage company, focus on the loan options and terms offered. Find the lowest fees and commissions among the lenders that offer the type of loan you need.
You should make sure that wholesale mortgage lenders have a decent track record, but for example, there is no negative attention from federal regulators, but it can reduce the time to worry about customer service. After all, in the origination stage, you will be dealing with a third party and your loan will likely be served by a company other than the original lender.
Is Wholesale Mortgage Loans perfect for you?
Getting a loan from a wholesale mortgage lender may be a good option if it is less than a star, as your credit history tends to have fewer strict requirements. And because they don’t have to spend much on advertising, lenders and overhead, wholesale lenders may offer better terms and charge less or cheaper closing costs.
However, you may not be in direct contact with the wholesale lender, so communication may seem slower and more mystical. Most mortgage brokers work on fees, but they are also charged. Include this price in your calculations when comparing options.
Additional Reports by Mia Taylor
