Can a Wholesale Mortgage Lender Save You Money?

Today’s mortgage rates can feel high, especially for first-time or budget-conscious home buyers. That’s why some borrowers turn to wholesale lenders that offer slightly lower rates than big banks. But what is a wholesale mortgage lender, and how do these loans work?

In this article, we’ll break down what a wholesale mortgage is and how it could save you money on your home loan.

In this article (Skip to...)

• What is a wholesale mortgage?
• Pros and cons of wholesale mortgages
• How to choose a wholesale mortgage company
• FAQ

What is a wholesale mortgage?

A wholesale mortgage is a type of home loan offered through a third party, like a mortgage broker, instead of being offered directly to the borrower. The wholesale lender provides the funding, but the broker handles the application process and serves as the go-between for the lender and the borrower.

In comparison, a retail mortgage is offered directly to the borrower by a bank, credit union, or other financial institution. With retail lending, the company funding the loan also handles the application and any customer interactions.

Some borrowers turn to wholesale mortgage lenders as a way to secure a better interest rate. These lenders don’t have the same overhead costs as retail mortgage lenders, which allows them to offer more competitive pricing. Mortgage brokers can also shop around with multiple lenders on your behalf to find the best rate and terms based on your financial situation.

Pros and cons of wholesale mortgages

Wholesale mortgage lenders can help you save on your mortgage costs, but there are trade-offs to working with one. Here are the biggest advantages and drawbacks to consider first:

Pros of wholesale mortgages:

• Lower interest rates: Wholesale lenders have less overhead than retail banks, which allows them to offer interest rates that are 0.125% to 0.50% lower than traditional mortgages.
• Reduced up-front fees: Many wholesale lenders charge lower origination or lender fees, reducing your total closing costs.
• More loan options: Because mortgage brokers work with multiple wholesale lenders, they can shop around to find programs tailored to your needs. For example, they may be able to find flexible loan terms for borrowers with less-than-perfect credit.
• Personalized guidance: The right broker will help you compare quotes and understand your options, which can be especially valuable to first-time homebuyers.

Cons of wholesale mortgages:

• No direct lender contact: All of your interactions will be with the broker, and you can’t contact the wholesale lender directly. Some borrowers may find this frustrating, especially if issues arise.
• Broker fees: While wholesale lenders often charge lower fees, some brokers tack on their own origination or service fees. These fees could reduce or eliminate your overall savings if you’re not careful.
• Loan servicing changes: Wholesale loans are frequently sold on the secondary market, which means the company you make payments to could change after closing.

How to choose a wholesale mortgage company

If you’re interested in taking out a wholesale mortgage, the first step is to find a broker to work with. A mortgage broker is a licensed professional who acts on your behalf to shop around for the best mortgage. Instead of applying with several banks yourself, the broker does the legwork for you.

Comparing quotes from several wholesale lenders will help you find the best deal. Your broker can collect multiple offers and help you understand the interest rates, fees, and closing costs different lenders charge.

Don’t just focus on the interest rate — look at the total loan costs, including any origination fees, lender credits, and third-party fees. And ask your broker which wholesale lender they recommend and why — some lenders are known for fast closings, flexible guidelines, or offering better customer service.

Ultimately, the quality of your experience will often come down to the broker you choose. A knowledgeable broker who presents clear options and helps you understand the pros and cons of each loan can make a big difference in your home-buying experience.

The bottom line: Is wholesale mortgage lending right for you?

There are real advantages to taking out a wholesale mortgage, especially in high-interest-rate environments.

A mortgage broker can help you find wholesale loans with lower interest rates, reduced fees, and flexible lending options.

Just make sure to work with a broker you trust, carefully compare each offer, and look at the total cost of each loan you’re considering.

Frequently Asked Questions