Cynthia Measom
3 min read
There are a lot of things homebuyers have to consider when looking to buy. One of those is deciding how to get financing. For example, when considering working with a mortgage broker versus a nonbank retail lender, you might wonder what the best financial move is for your money. A mortgage broker, per LendingTree, is a third party who connects individuals with lenders, while a nonbank retail lender loans money but isn’t affiliated with a bank.
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Read on for more details about choosing a mortgage broker or a nonbank retail lender.
Also see how to negotiate a lower mortgage rate, according to experts.
Casey Gaddy of The Gaddy Group with Keller Williams Empower Philadelphia said to think of nonbank retail lenders like taking a cab: “They work for one company, offer one set of products and the pricing is usually fixed. You get what you get, and that’s it.”
He said to compare that with using a broker, which, in his opinion, is more like using Uber or Lyft. “You’ve got options,” he said. “A mortgage broker shops your loan around to different lenders to try and find you the best deal — kind of like getting multiple drivers competing for your fare. They’re not tied to one bank, which means more flexibility in pricing and sometimes better service too.”
A 2024 study by Polygon Research, as reported by the National Mortgage Professional, confirms what brokers have claimed for years — working with a mortgage broker can save you serious money. Borrowers who used a broker saved $10,662, on average, compared with those who worked with nonbank retail lenders. But that’s not all.
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It’s not just long-term savings. Upfront costs are lower as well. In 2023, broker-assisted loans averaged 115 basis points upfront for a 6.58% mortgage rate, versus 148 basis points and a 6.6% rate for retail lenders, according to the study.
“Brokers usually have lower overhead than the big retail lenders, and in a lot of cases, they pass those savings on to the buyer,” Gaddy said. “Not always — but you can ask and sometimes even negotiate. So yes, borrowers do often pay less upfront with a mortgage broker.”
VA borrowers can realize big cost reductions by working with a mortgage broker as well. The study revealed an average savings of $13,432 per loan, with an interest rate of 6.26% versus 6.4% through retail lenders.
