Wholesaling
There are two types of lenders that will help a homebuyer open a new mortgage. A retail buyer works directly with a bank or lending institution. They will assign a loan officer from their local branch to reach out to a homebuyer with an offer that originates from their financial institution.
A wholesale lender, on the other hand, is a third party that does not work directly with the homebuyer. Instead, a whole lender uses a mortgage broker to connect with the homebuyer. The mortgage broker works to match the borrower with the best loan. The mortgage broker will closely review the homebuyer’s financial situation and help them find a loan with a competitive interest rate. The wholesale lender funds loans that are acquired from a mortgage broker on the secondary market. For a homebuyer who is looking for a more personal experience, working with a wholesale lender and a mortgage broker is a good option.
Benefits of a Wholesale Mortgage Lender
Wholesale lenders work with mortgage brokers funds mortgages that have been acquired by a mortgage broker who works outside of the company. One of the strengths of a mortgage broker is their ability to shop for wholesale lenders. The mortgage broker acts as an agent for the borrower and will research multiple loans to find the best interest rate and terms. Mortgage brokers who are well acquainted with both the industry and the borrower are often able to hand pick a mortgage loan that matches the buyer’s unique financial situation. By working with a mortgage broker, you might have more competitive loan options to choose from.
The Cost of Working with a Mortgage Broker
It is important to clarify the brokerage fees at the beginning of this process. Typically, a mortgage broker will work on commission and their fees are added to origination fee and paid with the closing costs. The Yield Point Spread (YPS) refers to the commission that the lender will pay the broker in return for matching a buyer with a loan. When the borrower qualifies for a certain interest rate, points that they pay over that interest rate is considered the “spread.” Oftentimes, the spread is where the mortgage broker makes their money. It is important for the borrower to review their Good Faith Estimate (GFE) in which all the costs of the loan are outlined in detail. If you have questions about the benefits of working with a wholesale lender versus a direct lender, please give us at call at 877-948-2562.
