Wholesale Mortgage Loans

If you’re considering refinancing your home loan you want the lowest mortgage rate and closing costs for your next mortgage. Refinancing with wholesale mortgage loans can not only get you the lowest possible mortgage rates but will help you avoid unnecessary fees… if you know how to do it. Getting wholesale mortgage loans can be tricky for the uninitiated; however, you don’t have to be financial gurus to get wholesale mortgage loans… you just need to know where to go. Here are several tips to help you get a wholesale mortgage loan when refinancing your home without paying unnecessary fees or markup.

Shopping for Wholesale Mortgage Loans

The first thing you need to know about wholesale mortgage loans is that they are not available to members of the public. If you contact a wholesale lender yourself you’ll be dealing with that lender’s retail division, not the wholesale lender itself. Before we can discuss how to go about getting wholesale mortgage loans it’s important to understand what makes a home loan wholesale and how wholesale lenders operate.

Before you can find a wholesale mortgage loan you need to know a little about the different types of mortgage lenders. The three types of mortgage lenders I’ll discuss today are banks, mortgage broker banks, and wholesale mortgage lenders. Bank mortgage loans can seem like a convenient way of refinancing your home loan right? What could be easier than having your mortgage payment automatically transferred from your checking account every month? The problem with bank originated mortgage loans comes from a little known loophole in the Real Estate Settlement Procedures Act that allows your bank to hide their profit margin and markup of your home loan.

Banks fund their mortgage loans with the bank’s money and therefore set their own mortgage rates. Your bank knows what wholesale mortgage rates are but marks up their mortgage rates up to collect a profit when your home loan is sold on the secondary market. Because of the loophole in RESPA legislation the bank is not required to tell you how much they’ve marked up your mortgage loan. The bottom line you need to know about bank home loans is that you’ll never get wholesale mortgage loans from your bank.

What about mortgage broker banks? When the RESPA laws were changed to exclude banks many mortgage brokers restructured their businesses to take advantage of the same loopholes enjoyed by your bank. These mortgage brokers formed lenders that fund their home loans with their own money and were therefore exempt from RESPA laws just like your bank. How can you recognize a mortgage broker bank? Simply ask if your home loan closes in their company’s name…if the mortgage closes in the broker’s name and not the wholesale lender you know you’re dealing with a mortgage broker bank.

Wholesale Mortgage Lenders

Wholesale mortgage lenders offer their products through mortgage brokers and other retail mortgage companies. They don’t offer wholesale mortgage rates to the public, but that doesn’t mean you can’t get wholesale mortgage loans. What makes a mortgage loan wholesale? Aside from the fact that it comes directly from a wholesale lender and not a bank or broker bank wholesale mortgage loans have mortgage rates that have not been marked up to create a commission for the person arranging your loan and do not require discount points be paid at closing. This type of wholesale mortgage rate is also known as a par mortgage rate. Your goal for refinancing your home should be to get as close to par as possible for your mortgage rate. How do you take advantage of par mortgage rates since wholesale lenders do not offer them to members of the public you ask? Simply find the right mortgage broker to arrange your wholesale mortgage loan without marking up your mortgage rate or charge you unnecessary fees.

Mortgage Broker Fees

Before you can find the right mortgage broker to arrange your home loan you’ll need to understand mortgage broker fees and compensation. Your mortgage broker gets paid for their work from a number of sources. The first, most obvious fee is the loan origination fee that appears on your Good Faith Estimate. Your loan origination fee is a flat fee you pay for the mortgage broker’s part in arranging your home loan. This fee is usually a percentage of your loan amount and a reasonable amount to pay the mortgage broker for loan origination is one percent of your home loan amount. Many brokers try and charge more than one percent; however, one percent is more than ample compensation for the mortgage broker’s work on your home loan.

The second way your mortgage broker get’s paid that we’re going to discuss today is the lender paid fee known as Yield Spread Premium. Mortgage lenders reward brokers that lock and close home loans with higher than necessary mortgage rates with a fee known as Yield Spread Premium. For every .25 percent that your mortgage broker overcharges you the lender pays them an additional one percent of your loan amount as a commission, this fee is paid in addition to the origination fee you’re already paying the broker. It goes without saying if you want wholesale mortgage loans you’ll need to find a mortgage broker that doesn’t take Yield Spread Premium in addition to your loan origination fee. Get yourself a mortgage rate that doesn’t include Yield Spread Premium and you’ll have a par mortgage rate, the wholesale mortgage loan you’ve been looking for.

How do you find the right mortgage broker to arrange wholesale mortgage loans? Start by telling potential mortgage brokers that you understand Yield Spread Premium and will not take a mortgage that includes this markup. Tell them you will pay a reasonable origination fee for their services but want a par mortgage rate for your next home loan. Once you’ve found the right mortgage broker for the job you’ll be on the path to refinancing your home with a wholesale mortgage loan.