WHY YOUR RATE QUOTE VARIES WHEN COMPARING LENDERS
Mortgage Broker
Chris Carter
Published on May 31, 2022

WHY YOUR RATE QUOTE VARIES WHEN COMPARING LENDERS

A mortgage company’s revenue comes from the “margin” that is paid to the lender by investors for each loan closed. Mortgage rates typically vary by .25% or more when comparing retail lenders to wholesale lenders, because retail lenders have a lot more cost & overhead.

When a lender reaches its capacity of loan applications its employees can process, it might keep rates slightly higher than necessary to keep from being overwhelmed; when business is slow, the lender might charge slightly lower rates to drum up business.

So, how do mortgage companies set their rates?

The answer is customer acquisition costs, or “profitability”. Profitability will likely include things like physical locations (offices), staff, sales, marketing & advertising efforts and origination costs as well.

Retail lenders may do everything in-house, but most likely they will have the highest rates and pricing fees, because of those pesky acquisition costs.

Conversely, working with a mortgage broker will bring down cost, due to low overhead & acquisition costs.

Naturally, lower rate & fees are passed to consumers.
To simplify…

Wholesale
Retail
Wholesale lenders work directly with the investor for ease of use, and can shop all investors for best pricing & terms. Retail lenders (banks, retail lenders, direct lenders, online lenders) don’t shop, and typically have only 1 investor, unlike a mortgage broker.
Wholesale originators do the shopping for you to ensure the best price and terms for your loan! They complete the transaction, then sell the loan to the final investor post-close.
Wholesale lenders typically have very low overhead, thus they can pass the savings to consumers. Retail interest rates are often times higher as these retail lenders have much more overhead.
Mortgage Broker
Chris Carter Mortgage Broker
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