Obtaining a mortgage loan can be a daunting task for most potential buyers. Without a manageable mortgage, the dream of owning your own home might never become a reality. Today's buyers have more options than ever before when it comes to financing the purchase of a home. One option available to you is to work with a wholesale lender.

What is a wholesale lender?

A wholesale lending company acts as the intermediary between the loan originator and the final investor.

Wholesale lenders work closely with mortgage brokers to originate home loans for residential applicants. The broker interacts with applicants on a face-to-face basis, while the lender is responsible for processing applications and providing credit decisions.

Although they are closely related, wholesale lenders and mortgage brokers are completely separate entities. Most mortgage brokers with with many different wholesale lenders to give their customers access to the loan products that will best suit their needs.

How do wholesale lenders make money?

The wholesale lender will not oversee a mortgage loan for the life of the loan. Instead, a bundle of loans will be sold to the final investor (usually a bank or credit union). The final investor pockets all profits from interest charged on the mortgage.

Wholesale lenders make money by charging underwriting and document preparation fees on each loan they process. Additional profits are obtained through the sale of loan bundles to retail investors.

Why work with a wholesale lender?

There are many reasons why a mortgage broker, and his or her clients by association, would choose to work with a wholesale lender rather than a retail lender.

The interest rates offered by wholesale lenders are often much lower than the rates available directly through retail lenders. Wholesale lenders can keep rates low because they will only be administering the loan for a short period of time. Once your interest rate is locked in, the final investor must honor the terms of your loan.

Wholesale lenders also act to protect potential buyers from the predatory loan practices that can be utilized by some retail institutions. Each wholesale lender must meet strict guidelines designed to protect the consumer in order to maintain the certifications required to do business. This attention to consumer well-being ensures that your mortgage will have the most favorable terms possible.

If you are in the market for a home loan, ask your mortgage broker about options available through a wholesale lender.