Wholesale Mortgage Lenders And Loan Program Guidelines

The mortgage lending landscape consists of various players, among which wholesale mortgage lenders play a critical role. Wholesale lenders offer various mortgage products through third-party mortgage brokers and financial institutions. This article explores what wholesale mortgage lenders do, the benefits they provide, and an overview of common loan program guidelines they offer.

Understanding Wholesale Mortgage Lenders

Wholesale mortgage lenders work behind the scenes, providing funds and mortgage products to mortgage brokers who interact directly with borrowers. Unlike retail lenders, who deal directly with the public, wholesale lenders do not interact with borrowers. Instead, they rely on brokers to originate, process, and close loans on their behalf. This model allows wholesale lenders to leverage the broker’s expertise and local market knowledge to reach a wider audience. Click here to find a wholesale mortgage lenders

Benefits of Wholesale Mortgage Lenders

1.  Competitive Interest Rates:
   Wholesale lenders often offer more competitive interest rates than retail lenders because they operate on lower margins. Brokers have the ability to compare and select the best rates among multiple wholesale lenders, ensuring borrowers get the most favorable terms.
2.  Diverse Loan Products:
   Wholesale lenders provide a broad spectrum of mortgage products, including conventional loans, FHA loans, VA loans, USDA loans, jumbo loans, and more. This variety allows brokers to find the right fit for each borrower’s unique situation.
3. Specialized Programs:
   Many wholesale lenders offer specialized loan programs designed for specific needs, such as low credit scores, self-employed borrowers, and those requiring non-traditional income verification.
4.  Efficient Processing:
   Wholesale lenders typically have streamlined processes and advanced technology to make sure fast and efficient loan processing. This efficiency can result in quicker closings and better overall customer satisfaction.

How Do Mortgage Brokers Operate?

Mortgage brokers have business relationships with wholesale mortgage lenders. Wholesale mortgage lenders make money by using their own funds or a warehouse line of credit in originating residential mortgage loans. They then package them up and reselling the mortgage loans to the secondary mortgage markets. Wholesale mortgage lenders are investors who do not deal with the public. Wholesale mortgage lenders only deal with licensed mortgage brokers and mortgage bankers.

Why Do Mortgage Brokers Have Dozens Of Wholesale Mortgage Lenders?

Many wonder why mortgage brokers have affiliate relationships with dozens of wholesale mortgage lenders. The reason being is because every wholesale mortgage lender has their own mortgage lending requirements and guidelines on top of the minimum FHA, Fannie Mae, Freddie Mac, VA, and USDA mortgage loan lending guidelines set by the GSE which are called mortgage lender’s overlays.

Overlays are mortgage lending guidelines that are in addition to the minimum guidelines set by federal mortgage regulators.

For example, to qualify for a 3.5% down payment purchase residential FHA mortgage loan, the minimum qualification is a credit score of 580. Although FHA requires a minimum of 580 credit scores to qualify for 3.5% home purchase FHA Loans, some wholesale mortgage lenders will require 620 credit scores. This is called mortgage overlays on credit scores.

Mortgage Lender Overlays Imposed By Wholesale Mortgage Lenders

A wholesale mortgage lender may have lender overlays of requiring their mortgage loan applicant a minimum credit score of 640. HUD guidelines do not require a mortgage loan borrower to pay off unsatisfied open collection accounts. However, a wholesale mortgage lender may require that open collection accounts be paid off as their lender overlays.

Most banks have their own overlays in not accepting any mortgage loan applicants that had a late payment after a bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale.

However, there are many wholesale mortgage lenders who do accept mortgage applicants with late payments after a bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale. The reason mortgage brokers have multiple wholesale mortgage lenders is because every mortgage loan borrower has a different credit and income profile

Find a lender for your mortgage, click here

Specialty Wholesale Mortgage Lenders

I deal with various different wholesale mortgage lenders and after I analyze the mortgage loan borrower’s income and credit profile, I choose the best wholesale mortgage lender that best suits the needs of my borrower and where I expect a mortgage loan approval with no hiccups. Here are a few wholesale mortgage lenders who I deal with.

1. Wholesale mortgage lender A:  No overlays, DU and/or LP FINDINGS are all the requirements:
   – Wholesale mortgage lender A has zero mortgage lender overlays.
   – As long as the mortgage borrower has an approve eligible per DU or LP Findings, that is the mortgage approval.
   – Open collections are acceptable and whatever the findings require, that is all they will go by.
   Why don’t I take every file there?
   The reason is it does take a little longer for a mortgage loan approval and rates are higher for those with credit scores under 620.
2. Wholesale mortgage lender B:  Good mortgage rates for those under credit scores of 620 FICO but has overlays on collections:
   Lender B is a great wholesale lender that I take files for those mortgage loan borrowers that have limited open collections:
   – This mortgage lender requires medical collections over $10,000 to be paid and regular unsatisfied collections over $7,500 to be paid
   – Mortgage rates are great for those mortgage loan borrowers with credit scores under 620
3. Wholesale mortgage lender C:  One-day mortgage approval and two weeks clear to close:
   Wholesale lender C is one of my favorite wholesale lenders:
   – This is because I get a mortgage loan approval within 24 hours of submitting the mortgage loan file and can get a clear to close within 2 weeks from the date of the mortgage loan approval.
   – This wholesale lender has minimum credit score requirements of 640 FICO but also has a debt to income restrictions
   – Any credit scores under 680 the maximum debt to income ratios are capped at 45% DTI.
   – The maximum DTI is 55% but needs credit scores of 680 or higher.

Approve for your mortgage loan With Our Loan Officer, click here

Manual Underwriting

Manual underwriting wholesale lenders: 

Not too many wholesale lenders will do manual underwrites:

• Manual underwrites are needed for those mortgage loan borrowers who do not get an automated underwriting system approval
• Manual underwriting debt to income ratios are normally capped at 31% front end debt to income ratios and 43% back end debt to income ratios
• Maximum debt to income ratio caps on manual underwriting is 50% DTI
• Verification of rent is required on all manual underwrites

Gustan Cho Associates will exempt verification of rent for borrowers who are living rent-free with family to save money for their down payment on a home purchase.

Jumbo mortgage loan wholesale lenders: 

I have affiliations with multiple jumbo mortgage loan lenders that offer up to 90% loan to value jumbo mortgage loans with no mortgage insurance required:

• The no mortgage insurance required jumbo mortgage loan program is called LPMI, Lender Paid Mortgage Insurance

LPMI mortgage loans are available for both conventional and jumbo mortgage loans.

Portfolio mortgage lenders:  Condotel mortgage loans and non-warrantable condo mortgage loans: 

• Portfolio wholesale mortgage lenders are investors who hold the mortgage loans in their own portfolio and do not sell them on the secondary market
• Condotel mortgage loans and non-warrantable condo mortgage loans are portfolio mortgage loans and so are unique property mortgage loans

Non-QM Loans & Bank Statement Mortgages For Self Employed Borrowers

Gustan Cho Associates are correspondent lenders on non-QM loans and bank statement mortgage loans for self-employed borrowers. There is no waiting period after foreclosure, deed in lieu of foreclosure, short sale with non-QM loans.

Self-employed borrowers no longer need tax returns with our bank statement mortgage loan programs. Two years’ bank statements are averaged to derive income.

Borrowers can use personal or business bank statement deposits. If personal bank statements are used, 100% of the deposits of the past 12 months are averaged. If business bank statement deposits are used, then 50% of the deposits are averaged over the past 12 months. 10% to 30% down payment is required on both non-QM loans and bank statement loan programs. Apply for Non-Qm loans & Bank statement mortgage loan for Self Employed Borrowers

Frequently Asked Questions (FAQs)

1. What is a wholesale mortgage lender?
   A wholesale mortgage lender provides mortgage products to brokers and financial institutions, which then offer these products to borrowers. Unlike retail lenders, wholesale lenders do not interact directly with borrowers but rely on brokers to handle the loan process.
2. How do wholesale mortgage lenders differ from retail lenders?
   Wholesale lenders work through third-party brokers, offering them various loan products at competitive rates. Retail lenders, on the other hand, deal directly with borrowers. Wholesale lenders often have lower operational costs, allowing them to offer more competitive rates.
3. What are the advantages of using a wholesale mortgage lender?
   – Competitive Rates: Wholesale lenders often offer lower interest rates due to reduced overhead costs.
   – Diverse Loan Options: They offer a diverse selection of mortgage products, including conventional, FHA, jumbo, USDA, VA, and non-QM loans.
   – Specialized Programs: Many wholesale lenders offer tailored programs for borrowers with specific needs, such as low credit scores or non-traditional income verification.
   – Efficient Processing: They typically have streamlined processes and advanced technology for faster loan approvals and closings.
4. What types of loans do wholesale mortgage lenders offer?
   Wholesale mortgage lenders offer various loan types, including:
   – Conventional Loans: Basic loans not insured by the government.
   – FHA Loans: Government-insured loans for borrowers with lower credit scores and smaller down payments.
   – VA Loans: Loans for veterans and active-duty service members with no down payment or mortgage insurance.
   – USDA Loans: Loans for rural homebuyers with no down payment.
   – Jumbo Loans: Loans exceeding conforming loan limits.
   – Non-QM Loans: Loans for borrowers who don’t fit traditional lending criteria.
5. What are the general guidelines for conventional loans?
   – Credit Score: Minimum scores typically range from 620 to 680.
   – Down Payment: As low as 3% for first-time homebuyers; generally 5% for others.
   – DTI Ratio: Maximum of 45%, possibly up to 50% with strong compensating factors.
   – Loan Limits: Vary by county, based on FHFA conforming limits.
6. What are the typical requirements for FHA loans?
   * Credit Score: Minimum of 580 for a 3.5% down payment; scores between 500-579 require a 10% down payment.
   * Down Payment: 3.5% for qualifying credit scores.
   * DTI Ratio: Typically up to 43%, but can be higher with compensating factors.
   * Mortgage Insurance: Requires upfront (1.75% of the loan amount) and annual premiums.
7. What are the qualification requirements for VA loans?
   * Eligibility: Available to veterans, active-duty service members, and eligible surviving spouses.
   * Credit Score: Generally requires a minimum score of around 620.
   * Down Payment: Often, no down payment is required.
   * DTI Ratio: Typically up to 41%, higher with strong residual income.
   * Funding Fee: A one-time fee, which can be financed into the loan amount.
8. What are the USDA loan guidelines?
   * Eligibility: For rural and suburban homebuyers with low to moderate incomes.
   * Credit Score: Minimum scores generally start at 640.
   * Down Payment: No down payment is required.
   * DTI Ratio: Typically 41%, but can be higher with compensating factors.
   * Mortgage Insurance: Annual guarantee fee and an upfront guarantee fee.
9. What are jumbo loan requirements?
   * Loan Amounts: Exceeding loan limits set by the FHFA.
   * Credit Score: Typically requires scores of 700 or above.
   * Down Payment: Typically ranges from 10% to 20%.
   * DTI Ratio: Maximum of 43%, though lower ratios are preferred.
   * Reserves: Borrowers may need significant cash reserves.
10. What are non-QM loans, and who are they for?
    Non-QM (non-qualified mortgage) loans are for borrowers who don’t meet traditional income documentation requirements. They offer flexible guidelines:
    – Credit Score: Varies widely by program.
    – Down Payment: Often higher than conventional loans.
    – DTI Ratio: More flexible, depending on the borrower’s overall risk profile.
    – Documentation: You may use alternative documentation like bank statements or asset-based qualifications.
11. How can brokers help borrowers with wholesale mortgage lenders?
    Brokers work with multiple wholesale lenders to find the best loan products and rates for borrowers. They can compare various options, negotiate terms, and provide expert guidance throughout the mortgage process, ensuring borrowers get the most suitable loan for their needs.

Home Buyers who need to qualify for a mortgage with a mortgage company licensed in multiple states with no lender overlays on government and/or conventional loans can contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.

Speak With Our Loan Officer for Mortgage Loans