When purchasing a home or refinancing a mortgage, there are both retail and wholesale lending options. The difference is wholesale mortgage lenders often partner with mortgage brokers, who work with you to find the right loan — sometimes at a discounted rate through the wholesale lender — and prepare your loan application.

What is a wholesale mortgage lender?

A wholesale mortgage lender is an institution that funds mortgages and offers them to third parties, such as a bank, credit union, mortgage broker or independent mortgage company or professional.

In wholesale lending, the borrower typically doesn’t have direct contact with the lender; instead, the borrower interacts with the third party, who is responsible for facilitating the loan origination and application process, and keeping the lines of communication open throughout underwriting. A wholesale lender lets these third parties know what their loan options and terms are, and the third party then matches borrowers with an appropriate loan.

Once the loans close, wholesale lenders typically sell them in the secondary mortgage market to free up capital to fund additional mortgages.

If you’re working with a mortgage broker, your broker is likely to have existing relationships with wholesale lenders, and could have access to a range of competitive rates and more flexible loan options and requirements. If you’re interested in getting the best mortgage rate and having someone who can walk you through the lending process, the broker and wholesale lender route might be a good fit for you.

Wholesale vs. direct, hard money and portfolio lenders

Wholesale mortgage lenders don’t deal with borrowers directly, so they’re different from other types of lenders.

  • Direct or retail mortgage lender – Direct or retail mortgage lenders are institutions that offer loan products directly to borrowers. These can include big banks, such as Bank of America or Chase; credit unions; non-depository institutions; or digital lenders like SoFi. They can have other offerings in addition to loans, as well, such as a savings account or investment options. Some of the more traditional direct lenders, like banks, might have more stringent requirements compared to a wholesale lender. Others, like an online mortgage company, might have more flexibility, and even lower rates.
  • Portfolio mortgage lenderPortfolio mortgage lenders can be a direct lender or other type of lender; the key is that they fund and hold onto a loan once it closes, instead of offloading it in the secondary market. Because they’re not selling the portfolio loan, a portfolio lender might be able to qualify a borrower who doesn’t fit the standards typically needed to sell it. This could mean easier approval odds or more favorable rates.
  • Hard money mortgage lenderHard money mortgage lenders offer hard money loans (also called bridge loans) for borrowers who can’t get approved for another type of loan or need funds quickly, such as a fix-and-flip investor. A hard money lender is generally an individual or a company with large cash reserves to lend out in short order, so they tend to be more flexible and close loans much faster. However, hard money lenders also usually charge a higher origination fee and interest rates in the double digits, making this a costlier, last-resort option compared to a wholesale lender.

Should you go wholesale? 

Getting a mortgage from a wholesale mortgage lender might be a good option if your credit history is less than stellar or unique, since a mortgage broker or other third party has a relationship with the lender and could get you approved under less strict requirements. You’ll work with the broker to complete all of the steps in the application process, and the broker will coordinate with the wholesale lender for approval.

A broker will also be able to help you find competitive rates and terms, since they can shop around for you using their wholesale lender contacts. A broker working on your behalf in this sense could save you time from having to do the research yourself.

However, since you’re not directly in touch with a wholesale lender, communication could be slower depending on the intermediary you’re working with. In addition, although the majority of brokers don’t charge a fee, there are some that do. Be sure to compare this cost to those of other lenders as you weigh your options.

How to find a wholesale mortgage

Since you can’t contact a wholesale mortgage lender directly, you’ll need to contact a mortgage broker or other institution that works in wholesale mortgages. A broker can help you find the loan that’s best for you and compare terms and rates across multiple wholesale lenders.

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