Every FHA, VA, USDA and Conventional loan is written to published guidelines, but the lender that funds it may add rules of its own and sets its own price. A bank shows you one set of rules and one price sheet. A broker shows the same application to many lenders and places it with the one that says yes on the best terms.
What a wholesale lender is
A wholesale lender funds loans that licensed brokers bring to it. The broker takes the application, pulls credit, gathers documents and matches the loan to a lender. The lender's underwriter gives the final approval, and the lender funds the loan at closing. As the Consumer Financial Protection Bureau puts it, a broker doesn't lend money, and you can use a broker to find different lenders or mortgage loans.
In Florida, mortgage brokers are licensed by the state and listed in the Nationwide Multistate Licensing System, where anyone can look up a license. AAA Capital Funding has been a Florida mortgage broker since 1997, NMLS #374739, and we shop multiple wholesale lenders on every loan we place.
Overlays: one lender's rules and the program's rules
FHA allows 3.5% down at a 580 credit score and approves total debt-to-income ratios up to about 56.9% through its automated system. A lender is free to set a stricter line, and many do. Those extra rules are called overlays. Common ones:
- A credit score floor of 620 or 640 on FHA loans
- A debt-to-income cap of 43% or 45%
- No manual underwriting when the automated system refers a loan to a human underwriter
- Limits on co-signers, recent collections or 2 to 4 unit homes
Take a buyer with a 600 score. A lender with a 640 floor declines the application before it reads a pay stub. A lender whose floor sits at FHA's 580 reviews the same buyer on income, debts and cash. A bank has only its own floor to offer. A broker sends the application to a lender whose rules already accept it. The page on being turned down by a bank runs the same idea on a debt-to-income ratio.
A worked example: what a quarter point is worth
Wholesale lenders don't price the same loan the same way on the same day. Take a $300,000 loan on a 30-year fixed, priced at two lenders a quarter point apart:
| Lender A | Lender B | |
|---|---|---|
| Rate | 5.75% | 6.00% |
| Monthly principal and interest | $1,750.72 | $1,798.65 |
The gap is $47.93 a month. Over a year that's $47.93 × 12 = $575.16. Over five years it's $47.93 × 60 = $2,875.80, and over the full 30 years it's $47.93 × 360 = $17,254.80. The loan, the borrower and the house are identical. The only difference is which lender's price sheet the loan was placed on.
Price differences show up in closing costs too. One lender may offer a credit toward closing costs at a rate where another charges points, so we compare the full Loan Estimate, the rate and the costs together.
What working with a broker looks like
You fill out one application and authorize one credit pull. We read your credit, income, debts and cash, then submit to the wholesale lender whose rules and pricing do the most for you. If that lender asks for something we didn't expect, we can move the loan to another lender without starting over with a new application. You deal with one person from the first call to closing, and the lender's underwriter and closing department work through us.
This matters most for the buyers banks most often decline: credit scores between 580 and 640, higher debt-to-income ratios, co-signers, recent collections, self-employment, duplex purchases and down payment assistance. The program rules allow all of these, and placing the loan with a wholesale lender whose overlays allow them too is what gets them approved.
The affordability calculator shows the price your income supports under each program's published limits. Then call AAA Capital Funding at 888-601-8344, and we'll put your application in front of the wholesale lenders whose rules and prices suit it.