Two models
A direct lender funds loans itself. A mortgage broker works with multiple wholesale lenders and arranges the loan with one of them. Both must be licensed, and both must provide the same disclosures.
How brokers are paid
A broker may be paid by the borrower or by the lender, but not both on the same transaction. Lender-paid compensation is built into the rate.
How mortgage brokers and lenders are paid, and the federal rules that limit compensation conflicts.
Anti-steering rules
Regulation Z prohibits loan originators from steering you to a loan that pays them more unless it is in your interest, and provides a safe harbor when they present a set of loan options that includes, for each type of loan you are interested in, the option with the smallest interest rate, the option with the smallest total points and fees, and the option with the smallest rate that has no risky features. Compensation cannot vary based on loan terms other than the loan amount.
Where it appears
Broker compensation paid by you appears in Section A of the Loan Estimate. Lender-paid compensation may not appear as a line item.
Which is better
Neither model is always cheaper. Compare Loan Estimates from both kinds of originators.
Questions
Ask how the originator is paid and whether they can show you several loan options.
Dual compensation
An originator cannot receive compensation from both you and the lender on the same loan. If you see both, ask why. The rule exists so that you know who is paying your originator and can judge the advice you receive.
Sources
Sources checked 10/23/2026. General education only; confirm current rules with official sources and a licensed lender.