Since the housing crisis of 2008, there have been some massive shifts in the mortgage industry, and people have been changing their preferences regarding the type of lending experience they are looking for. Many customers want a personable mortgage experience, because it gives them a chance and opportunity to ask the questions that are on their mind, and they feel safe working directly with the lending institution instead of a middle man, but often times these borrowers don’t understand the advantages of working with a broker that does business with a wholesale lender.
How Wholesale Mortgages Work
If you want your loan to go through a wholesale mortgage lender, then you should know that they are functioning by working with mortgage brokers who sell their loans on a secondary market. They are basically a “middle man,” who help with the risk analysis and working through the application process. In this process, independent brokers do the work to find the lenders who are willing to fund the loan.
Keep in mind, the wholesale mortgage process is more than just bridging the financial operation, because the wholesale lender actually funds the loans, and the transactions are made in their own name. Even though they are offering the initial funding in their own name, they turn around and sell those funded loans on the secondary market to investors who are interested in purchasing them.
This process allows the wholesale operation to make money through the secondary market because of institution-wide profits and individual commissions. Since the housing crisis, it is becoming more difficult to find these types of lenders through big mortgage providers. So, if you are looking for wholesale mortgage options, then you should consider talking with an independent mortgage broker instead of a large banking institution.
Wholesale Mortgage Lender Advantages
Instead of going retail with your loan, you might consider the wholesaler option for several reasons. First of all, it’s often easier to find lower interest rates in wholesale lending, which means that you can pay less interest costs on your loan. The wholesale lender pays the Yield Spread Premium (YSP) fee to the broker, which helps the consumer avoid additional processing fees.
Also, there is generally a lower risk in wholesale lending, mainly because profits can be quickly driven through secondary market sales. This decreased risk helps to provide lower interest rates, which is beneficial to the borrower.
If you are considering a wholesale mortgage option, then you can be rest assured you will have an experience that is more personalized than dealing with traditional mortgage bankers. A wholesale broker has more ability to customize loans to match the needs or preferences of borrowers. Additionally, borrowers are often able to get better terms on their loan because the wholesale lender has different types of investors they can sell mortgage loans to in the secondary market.
It can be a headache to secure a mortgage loan, but if you’re working with the right institution then you can quickly bypass some of the problems that may arise. If you have any other questions about wholesale mortgage lending, please feel free to call Dave directly at (303) 520-0004.
