Wholesale lenders are the mortgage companies that brokers send applications to. Through the wholesale channel they work with licensed brokers instead of taking applications from the public. They publish rates and approval rules for licensed brokers, underwrite the loans those brokers submit, and fund each loan at closing with their own name on the note.
What a wholesale lender controls
Four things change from one wholesale lender to the next, and each one can decide whether a loan closes and what it costs:
- The price sheet. A daily grid of rates, each paired with points you'd pay or a credit you'd receive. A point is 1% of the loan amount.
- Overlays. House rules layered on FHA, VA, USDA and Conventional guidelines, such as a higher score floor, a lower debt-to-income cap, or no 2 to 4 unit homes.
- Underwriting. The lender's own underwriters review the loan and issue the conditions, and their turn times vary.
- Closing. The lender prepares the closing documents and wires the money to the title company.
Same rate, three prices
Picture a $320,000 FHA loan at a 5.75% rate. The principal and interest is $1,867.43 a month no matter which lender funds it. The difference shows up in cash at closing. With one point equal to $3,200 on this loan, here's how one day's price sheets might compare:
| Lender | Pricing at 5.75% | Effect on closing costs |
|---|---|---|
| Wholesale lender A | 0.375 points charged | $1,200 added |
| Wholesale lender B | Par, no points or credit | $0 |
| Wholesale lender C | 0.25 points as a credit | $800 subtracted |
The math is 0.375 × $3,200 = $1,200 and 0.25 × $3,200 = $800. Choosing lender C over lender A keeps $2,000 in the buyer's pocket for the same rate and the same payment. A credit like that can also help a buyer short on cash to close, alongside a seller credit of up to 6% on FHA.
Why a broker uses several
Rates, credits and overlays move every day, and a lender that's sharpest on an FHA purchase may be second-best on a VA loan or a fourplex. A broker compares the sheets when you apply and again when you lock. Your Loan Estimate then shows the lender's points or credit on its own line, so the price you were quoted is the price in writing.
Run a lender credit or a points charge through the cash to close calculator to see how it moves the money you bring to closing. AAA Capital Funding prices every application against multiple wholesale lenders, so call 888-601-8344 for a quote compared across several of them.