If you’re looking to save money on your next mortgage, a mortgage broker might be able to help.
A firm by the name of Polygon Research conducted a study and found that mortgage brokers can save consumers money versus other channels, such as retail.
The research, which was supported by the nation’s top mortgage lender (also a wholesale-only lender) United Wholesale Mortgage, found “substantial savings for consumers on average” via the wholesale channel.
For reference, the wholesale channel is B2B, where mortgage brokers provide financing to consumers from their lender partners.
Instead of being captive to a single bank or lender, they can shop the borrower’s loan scenario with multiple partners at once to find the best combination of rate and fees.
On the other hand, a retail loan officer can only offer pricing and loan programs from their captive lender.
Lower Rates and Lower Fees with Mortgage Brokers
The research found that for loans originated in 2023, consumers would save an average of $10,662 over the life of their loan when working with an independent mortgage broker compared to a nonbank retail lender.
Some of the largest nonbank retail lenders include Rocket Mortgage, CrossCountry Mortgage, loanDepot, Rate (formerly Guaranteed Rate), and Movement Mortgage.
Polygon also said upfront fees were lower on broker-originated loans compared to those originated by retail loan officers.
And the study found higher loan approval rates in Minority Majority Census Tracts (MMCT) via the wholesale channel (70%) versus retail (58%).
The average interest rate extended to home purchase consumers via the wholesale channel was 6.58% with 115 basis points paid upfront.
Conversely, the average interest rate received in the nonbank retail channel during that period was 6.60% with an upfront cost of 148 bps.
While the rates are fairly comparable, the borrowers via the wholesale (mortgage broker channel) paid less.
For example, on a $500,000 loan amount, the costs mentioned would be $5,750 versus $7,400, respectively.
The savings were even larger for VA loans, those reserved only for veterans and their families.
VA borrowers save an average of $13,432 per loan when they use a mortgage broker instead of going with a retail lender.
They obtained an average rate of 6.26% versus a rate of 6.40%, with a cost of 87 bps compared to 106 bps via the retail channel.
Of course, these savings can and will vary, and it depends who you speak with.
This is why I recommend that borrowers compare mortgage brokers too. Speaking to just one won’t give you the complete picture, even though they do shop on your behalf.
In a perfect world, you might speak to multiple retail loan officers and multiple mortgage brokers to truly comparison shop.
Mortgage Broker Share Has Grown a Lot and Could Keep Getting Bigger
While mortgage brokers got a lot of flak during the early 2000s for originating loans that performed worse than their counterparts, even getting blamed for the mortgage crisis, they’ve since seen quite a renaissance.
Back in March, UWM noted that the mortgage broker share hit a staggering 24.3% in the fourth quarter of 2023, the highest share since 2009.
A lot of that growth could be attributed to UWM and its CEO Mat Ishbia, which became the first wholesale lender to take the #1 spot overall in the mortgage world.
And he has ambitions to increase it even further, noting that it wouldn’t be “unrealistic for the channel to hit 50% market share.”
While that remains to be seen, there are other big players in the space that could drive it higher, including their cross-town rival Rocket Mortgage, which operates Rocket Pro TPO, their growing wholesale division.
As noted, UWM is the nation’s top mortgage lender based on loan volume. The Pontiac, Michigan-based company funded roughly $109B in 2023, per HMDA data.
That was plenty to outrank their closest rival, Rocket, which mustered just $76B.
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 18 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on Twitter for hot takes.
