Mortgage loans are generally funded through either a wholesale loan or a retail loan. They are similar in some respects but differ in others, and it’s important as a borrower to know the difference.
With wholesale loans, the lender offers loans to mortgage brokers at lower costs than the retail lenders make available to the general public. The broker, in turn, adds his/her fees to this lower wholesale rate. The end result is that the home borrower obtains a loan that is about the same cost as a loan that is directly from the lender's retail branch.
Retail loan lenders perform all of a loan's origination themselves, while wholesale lenders have mortgage brokers perform many of the loan functions. Many large banks and lending institutions have both retail and wholesale loan divisions, including Caliber Home Loans, Inc.
To sum it up, both a broker and retail loan officer work on the behalf of their borrower. To a borrower, the overall cost is about the same, it's just a matter of preference.
*This article is provided for information purposes only and does not constitute legal or other professional advice.
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