How to Get a Wholesale Mortgage Rate


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

Wholesale mortgage rates are typically considerably cheaper than their retail counterparts, though it’s never a guarantee.

And 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 or credit union for a mortgage rate, a broker can shop your application around with a number of different lenders all at once 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 lender 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).

(The practice described just above has since been outlawed to prevent steering, the format below is current and applies today).

Today's Rates

If there is a cost associated with the interest rate, 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. However, closing costs may still apply.

If there’s a rebate it goes to the borrower via a lender credit, meaning it can cover some or all of your closing costs so you don’t have to pay them out of pocket. This can be quite beneficial if you’re light on cash or simply don’t want to pay for a given rate.

Wholesale Channel Might Not Offer the Best Pricing

As with anything else you shop for, it’s important to keep in mind that a wholesale rate may not always be the best deal for you.

Retail banks can compete with wholesale lenders by charging lower fees and/or using existing relationships to knock down the mortgage rate.

So while a broker may tell you they’ve got access to the lowest rates available, they may not be able to compete with certain banks or credit unions you have a prior relationship with.

Or it could be that a retail bank (or online mortgage lender) has a pricing special for a given loan product that the wholesale guys simply can’t match.

In summary, it’s best to compare both routes (mortgage brokers vs banks) to determine which is best for your unique situation and loan needs.

You should certainly put in the time to compare different rates at a variety of banks to ensure you don’t miss anything better that might be out there.

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 find potential solutions in a shorter period of time.

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