Wholesale Mortgage Lenders vs. Retail Mortgage Lenders

wholesale mortgage lenders are banks or financial institutions that do not deal directly with customers. Instead, wholesalers make loans through mortgage brokers, credit unions, or other banks. This can be confusing, because many large banks also have retail operations that work with customers.

Mortgage Wholesale Lender

If you work with a wholesale lender, they will be making the loan, and the wholesale lender's name will appear on loan documents. The third party, such as a mortgage broker, works as an agent for a fee. Think of the third party in this arrangement as a matchmaker. The mortgage broker works to pair the borrower with the right lender and loan program, reviewing the borrower's information to find the best loan with the lowest rate.

Wholesale lenders are similar to mortgage bankers because they originate and service the mortgages and sell them on the secondary market. Once the third party secures the deal, it is sent to the wholesaler for underwriting, processing, and funding.

Mortgage Retail Lender

Retail lenders, on the other hand, issue loans directly to the consumers rather than institutions. Such retail lenders include banks, credit unions, mortgage bankers, and savings and loans institutions. This is the type of situation most buyers are familiar with.

Wholesale Lender Mortgage Broker

You have a few choices in terms mortgage brokers. An upfront mortgage broker is usually the best option. In this scenario, the broker will receive a fixed compensation, with the ability to combine interest rates and points. As the broker gets a fixed amount of compensation regardless of which lender or loan you choose, you will be certain that they are not hiding any payments they get to push you to work with one mortgage lender over another.