If you’re looking to save money on your next mortgage, a mortgage broker may be able to help.
A company called Polygon Research conducted a study and found that mortgage brokers can save consumers money compared to other channels, such as retail.
The research, backed by the nation’s largest mortgage lender (and also a wholesale-only lender) United Wholesale Mortgage, found “significant savings to consumers on average” through the wholesale channel.
To clarify, the wholesale channel is B2B, where mortgage brokers provide financing to consumers from their lending partners.
Rather than being held hostage to a single bank or lender, they can research a borrower’s loan scenario with multiple partners at once to find the best combination of rates and fees.
On the other hand, a retail loan officer can only provide rates and loan programs from the captive lender.
Lower rates and lower fees with mortgage brokers.
The research found that for loans issued in 2023, consumers will save an average of $10,662 over the life of their loan when working with an independent mortgage broker compared to a non-bank retail lender.
Some of the largest non-bank lenders include Rocket Mortgage, CrossCountry Mortgage, loanDepot, Rate (formerly Guaranteed Rate), and Movement Mortgage.
Polygon also said that upfront fees were lower on loans originated by brokers than those originated by retail loan officers.
The average interest rate given to consumers buying homes through the wholesale channel was 6.58% with a down payment of 115 basis points.
In contrast, the average interest rate received in non-bank retail channels during the period was 6.60% with an initial cost of 148 basis points.
While the rates are fairly close, wholesale borrowers (the mortgage broker channel) paid less.
For example, for a $500,000 loan amount, the costs listed would be $5,750 versus $7,400, respectively.
Savings were greatest for Department of Veterans Affairs loans, which are loans intended only for veterans and their families.
VA borrowers saved an average of $13,432 per loan when they used a mortgage broker rather than a retail lender.
They also received an average price rate of 6.26% versus 6.40%, at a cost of 87 basis points compared to 106 basis points via the retail channel.
Of course, these savings can and will vary, depending on who you talk to.
That’s why I recommend borrowers compare mortgage brokers as well. Talking to just one broker won’t give you the full picture, even if the broker is shopping around on your behalf.
In an ideal world, you would talk to several retail loan officers and several mortgage brokers to really compare rates.
The share of mortgage brokers has seen significant growth and may continue to grow.
Although mortgage brokers were heavily criticized in the early 2000s for issuing loans that performed worse than their peers, and even being blamed for the subprime mortgage crisis, they have since experienced a major renaissance.
In March, UWM noted that mortgage brokers’ share reached a staggering 24.3% in the fourth quarter of 2023, the highest share since 2009.
Much of this growth can be attributed to UWM and its CEO Matt Ishbia, who became the first wholesale lender to rank No. 1 overall in the mortgage world.
He added that he aspires to increase this share further, noting that it would not be “unrealistic for the channel to reach a 50% market share.”
While that remains to be seen, there are other big players in the space that could push it higher, including cross-town rival Rocket Mortgage, which operates Rocket Pro TPO, their growing wholesale division.
As mentioned, UWM is the nation’s largest mortgage lender based on loan volume. The Pontiac, Michigan-based company financed nearly $109 billion in 2023, HMDA Data.
That was enough to outpace their closest competitor, Rocket, which had raised just $76 billion.
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