Lender-paid compensation · LPC
The wholesale lender pays the brokerage under an agreement set in advance and accounts for that expense in its pricing. You may see no borrower-paid broker origination fee and no discount points — but the compensation is still part of the economics of your rate.1,2
In my experience lender-paid compensation is often set at 2.50% of the loan amount, and I also see agreements at 2% and 3%. Those figures describe arrangements I encounter — not a required schedule, an industry minimum or a maximum.
The broker cannot collect twice. On a lender-paid loan the broker cannot also charge you a borrower-paid origination fee for its compensation. Legitimate lender charges, discount points and third-party closing costs still apply. Ask who receives each fee.2
Borrower-paid compensation · BPC
You pay the brokerage an agreed fee, such as an origination charge, separate from discount points. A lower borrower-paid fee means the loan has less broker compensation to support, which can leave room for better pricing — though the label alone does not tell you which option needs more cash or costs more over time.3,4
Where to look on the page
Lender-paid compensation is not itemized on the Loan Estimate, but it is on the Closing Disclosure.3,4 A retail lender’s internal margin on the same loan is not itemized anywhere, on either document.
Why a visible fee can cost less
“No origination fee” is not the same as the least expensive loan. Imagine two otherwise similar offers. One supports lender-paid broker compensation of 2.50%. The other uses a borrower-paid broker fee of 1%. The second loan has less broker compensation to cover, which can create room for a lower rate. All percentages here are of the loan amount.
| Illustrative comparison | Lender-paid offer | Borrower-paid offer |
|---|---|---|
| Broker compensation | 2.50% paid by lender | 1% borrower-paid fee |
| Separate broker origination fee | None charged to borrower | 1% shown in Section A |
| Lender credit in this example | None assumed | 1% toward other eligible costs |
| What to compare | Actual rate and total costs | Actual rate and total costs |
The lender credit is a separate piece
A borrower-paid offer may also provide a lender credit. Choosing a rate that generates that credit generally means accepting a higher rate than the same borrower-paid loan without it. Even so, that rate can still be lower than the lender-paid alternative. The actual quotes decide.5
How the cash can balance out
If the borrower-paid fee is 1% and a lender credit equal to 1% covers other eligible costs you would have paid anyway, the credit can offset the fee’s effect on your total cash. You still pay the broker fee; you simply bring less cash for those other costs.
The loan with the visible 1% broker fee may leave you with a lower rate and similar total cash needed. Do not reject it because the other quote says “no origination fee.” Compare both complete offers.
Sources
These references support the factual explanations above. Where this page states a preference rather than a fact, it says so — those are our editorial judgement, not a claim that any one channel always costs less.
Next
Start with a broker. Then vet the broker.The structural advantage is real. It is not automatic, and not every broker works it.Every rate has a pricePar, discount points and lender credits — the trade between up-front and over time.The whole argument, in one place
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