What is the difference between correspondent and wholesale lending

Retail lenders are exactly what they sound like, lenders who issue mortgages directly to individual consumers.

They may either lend their own money or may act as an agent for Again, retail lending may simply be one function offered by a larger financial institution, which may also offer commercial, institutional and wholesale lending, as well as a range of other financial services. Somewhat similar to wholesale lenders are warehouse lenders.

The key difference here is that, instead of providing loans through intermediaries, they lend money to banks or other mortgage lenders with which to issue their own loans, on their own terms. The warehouse lender is repaid when the mortgage lender sells the loan to investors. Another distinction is between portfolio lenders and mortgage bankers. The vast majority of U. Once the mortgage is made, they sell it to investors and repay the short-term note. Those mortgages are usually sold through Fannie Mae and Freddie Mac, which allows those agencies to set the minimum underwriting standards for most mortgages issue in the United States.

Portfolio lenders, on the other hand, use their own money when making home loans, which they typically maintain on their own books, or "portfolio. This makes portfolio lenders a good choice for "niche" borrowers who don't fit the typical lender profile - perhaps because they're seeking a jumbo loan, are considering a unique property, have flawed credit but strong finances, or may be looking at investment property.

You may pay higher rates for this service, but not always - because portfolio lenders tend to be very careful who they lend to, their rates are sometimes quite low. If you can't qualify through a portfolio lender, a hard money lender may be your option of last resort.

Hard money lenders tend to be private individuals with money to lend, though they may be set up as business operations. Interest rates tend to be quite high - 12 percent is not uncommon - and down payments may be 30 percent and above. Hard money lenders are typically used for short-term loans that are expected to be repaid quickly, such as for investment property, rather than long-term amortizing loans for a home purchase.

Another term you may encounter is "direct lender. It can therefore be either a mortgage banker or portfolio lender. It does not, therefore, act as an agent for a wholesale lender. Direct lenders are inevitably retail lenders as well, because they do not involve third parties or middlemen in making loans to consumers. A final term you may hear is "correspondent lender. Working with a correspondent lender comes with a unique set of advantages that combines some of the best aspects of other lending options.

They lend the funds like a traditional lender but also shop your mortgage around similar to the way a mortgage broker operates. Brokers, however, must report any fees to the borrower when the mortgage is settled. Many credit unions act as correspondents themselves. Once the mortgage is closed, the credit union will sell the notes to other larger lenders.

This transaction gives them the capital to continue issuing mortgages to other borrowers. Whether a correspondent lender is the right choice for you depends on your unique financial situation. As with any loan or lender, it never hurts to do a little research on your own. No Cost? No Joke. This Checking Is Free Our free checking account comes with absolutely no monthly fees or minimum balance requirements.

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Ready for Retirement? Live the retirement lifestyle you want. We will help you get there. Getting started with a mortgage application can feel confusing, even invasive. Various lenders ask for documents from every aspect of your personal and financial life, and the complexity can be overwhelming.

The borrower is obligated to repay the loan in full under the terms of the loan. Getting an interest rate of 4. Non-bank lenders are not considered full-scale banks because they do not offer both lending and depositing services. They are not a bank. Banks no longer dominate the U. Mortgage refinancing is usually done to secure better loan terms than borrower's current loan, like a lower interest rate or a lower monthly payment.

This helps replenish mortgage lenders' funds so that they have more money available to lend for home purchases and refinances. By selling mortgages to Freddie Mac, lenders can replenish their funds so they can lend money to other borrowers, increasing the money available for new home purchases. In this type of lending, the wholesale lender is the one that is actually making the loan and whose name typically appears on loan documents.

The third party — bank, credit union, or mortgage broker — in most cases is simply acting as an agent in return for a fee. A wholesale mortgage lender is distinct because it works with independent mortgage brokers, who are client-facing.