How to Get a Wholesale Mortgage Rate
When a bank makes a home loan, it marks up a par (base) rate to include a premium it is paid by the investor (HUD, Fannie Mae, etc.). A wholesale mortgage rate is a rate at which a bank is not paid a premium for making the loan. In short, it is a home loan made with a par interest rate. Obtaining a wholesale rate on a mortgage is possible; in fact, it is often cheaper in the long run for many borrowers.
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Instructions
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Contact a bank and ask it for a list of interest rates on each of its mortgage programs. A rep will likely direct you to its website or have a loan officer quote you rates over the phone. Regardless, speak to a loan officer and ask her if it is possible, if you qualify, to secure a "par," or wholesale rate, as the rates you will be quoted will be marked up.
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Explain to your loan officer that you are willing (if you're able) to pay a premium (points) to secure a rate at which the lender and loan officer is not paid a premium for making the loan. Because some loan officers are required to make the lender a minimum premium on each loan, make sure they quote the lowest rate. Ask what it will cost you out-of-pocket to secure that rate.
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Calculate your savings. Paying points to secure a wholesale rate may cost you several thousand dollars upfront. However, it may save you tens of thousands through the life of your loan. For example, a $150,000, 30-year fixed loan with a standard interest rate of 6.25 percent will come with a monthly principal and interest payment of $923.58. If you buy the rate down to 5 percent, and it costs you $6,000 (4 points), your new monthly payment would be $805.23. You would save $118.35, and recover the cost in just more than four years. However, over the life of the loan, you would save $42,605.12.
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Lock in a rate and proceed with the application/underwriting process. Lock in an interest rate as soon as you negotiate a rate with your lender. Make sure, however, that there is not a markup for locking your rate. Some lenders require a "lock fee" for holding a rate for a specific period.
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Tips & Warnings
Only work with an experienced loan officer.
References
Resources
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