Wholesale lending vs. retail lending

What’s the difference between wholesale lending and retail lending? 

Mortgage loans generally fall into two categories: wholesale loans or retail loans.

With wholesale loans, the lender offers loans to mortgage brokers at discounted costs. Then the broker adds his fees to this lower wholesale rate. Retail lenders work directly with the borrower, and the final cost for the borrower is usually about the same.

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. 

Retail loan lenders perform these functions:

• Find customers.
• Take loan applications.
• Lock in loan terms.
• Underwrite loans.
• Process loans.
• Close and fund loans.

Wholesale loan lenders (who work with brokers) perform these functions:

• Lock in loan terms.
• Underwrite loans.
• Close and fund loans.

Mortgage brokers (who work with wholesale lenders) perform these functions:

• Find customers.
• Reviews loan options for each customer.
• Processes loan applications.

Wholesale or Retail: Is one better? 

In the end, both types of lending have their advantages and what a borrower decides depending on their circumstances, experience, and knowledge.

However, using a mortgage broker can save a borrower the time and effort of doing research on their own.

*This article is provided for information purposes only and does not constitute legal or other professional advice.