How to Get a Wholesale Mortgage Rate

September 1, 2010 No Comments »

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Mortgage Q&A: “How to get a wholesale mortgage rate?”

Wholesale mortgage rates are typically considerably cheaper than their retail counterparts.

But to get your hands on one, you need to shop for your home loan with a mortgage broker, who has access to wholesale mortgage rates.

Mortgage brokers work as middlemen between homeowners and banks and mortgage lenders.

Instead of shopping with a single retail bank for a mortgage rate, a broker can shop your application around with a number of different lenders to find you the most competitive rate.

So the advantage can be two-fold, as you can benefit from both access to wholesale rates and a greater number of different options to compare.

Wholesale mortgage rates come with associated rebates or costs.

If there is a rebate, the broker can earn a commission for offering the rate, known as the yield spread premium.

A broker then has the option to simply collect this fee and not charge you upfront, or charge you in the front as well via mortgage points (loan origination fee).

If there is a cost, the borrower will have to pay to obtain the rate by paying upfront costs, known as mortgage discount points.

If there is neither a cost or a rebate, it is considered the par rate, meaning you receive the exact rate you qualified for.

But keep in mind that a wholesale rate may not always be the best deal for you.

Retail banks can compete by charging lower fees or using existing relationships to knock down the mortgage rate.

It’s best to compare both routes (mortgage brokers vs banks) to determine which is best for your unique situation.

Tip: If your loan scenario is particularly tricky, you may be best served by going with a mortgage broker, as they’ll be able to get multiple answers in a short period of time.

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