Wholesale Mortgage vs Retail Mortgage: What's the Difference?
With all the different financial institutions offering mortgages these days, keeping up with the details and differences can be a challenge. While it would take time to become an expert in the ever-changing mortgage industry, a basic understanding of the options available can go a long way.
Mortgages can be offered through wholesale lenders or retail lenders. Knowing the difference between the two can help aspiring mortgage professionals plot out their careers, and prospective homebuyers make smart purchasing decisions.
Mortgage Lenders vs. Mortgage Brokers
Before we dive into the differences between wholesale and retail, let’s clear up the relationship between a mortgage lender and a mortgage broker.
Mortgage lenders are the financiers of the home-buying process. When someone decides to purchase a home or refinance a mortgage they already have, the mortgage lender makes it possible by loaning the money needed to complete the transaction. Each lender has criteria you’ll need to meet to qualify for the loan, with FICO score and financial resources playing a major role. Beyond determining eligibility, overall creditworthiness often dictates the interest rates and loan types offered.
Mortgage brokers are the matchmakers of the home-buying process. They work on the homebuyer’s behalf and shop multiple lenders to find the rates and terms that meet their clients’ needs. Mortgage brokers usually rely on their relationships with wholesale lenders (we’ll cover them next) who offer discounted rates that aren’t available directly.
Wholesale and Retail Lenders
Most American adults are at least loosely familiar with the retail lending process. Retail lenders handle the loan in-house, and work directly with prospective homebuyers to complete the transaction. They also only offer products available from their own institution. The standard process includes: submitting an application with the lender (often a bank or credit union), and if the homebuyer is approved, the lender cuts a check and the buyer begins paying the same lender back.
Wholesale lenders are different in that they don’t work directly with homebuyers. Instead, they offer their home loans through third-party clients like mortgage brokers and correspondent lenders. Armed with this info, the standard process includes: the broker shops around to find the best mortgage terms ad rates for their clients — the homebuyers. The wholesale lender then underwrites and funds the loan.
Opportunity in the Mortgage Industry
The bottom line is that mortgage lenders aren’t all created equally. If a prospective homebuyer wants to move through the mortgage process with confidence, it’s important to understand the difference between retail and wholesale lending. This truth creates a great opportunity for mortgage professionals who are ready to seize it.
Buyers know that shopping around leads to the best deal, but when it comes to mortgages, buyers just don’t have the time. Working with a mortgage broker allows the buyer to reap the benefits of savvy shopping without doing all the research on their own.
The more loan products a mortgage professional has at their disposal, the more likely it is they’ll find one that’s perfect for their client. Retail lenders handle everything in-house and can only offer their in-house products regardless of the needs of their clients. Wholesale mortgage brokers have access to multiple lenders and their respective loan products, so finding one that truly works is much easier.
This means more ‘yesses’ given, more loans closed, more happy homes created.
Are you ready to jump-start your career in the mortgage industry? Our team at BeAMortgageBroker.com is here to help you every step of the way.