Mortgage Brokers vs Banks vs Credit Unions: Which Lender Type Saves You the Most Money in 2025?

My sister-in-law refinanced her mortgage three times in the past decade. The first time, she used Wells Fargo (her bank) and got 4.25% when the market average was 3.875%. The second time, she used a credit union and got 3.125% when the market was 3.25%—a great deal. The third time, she used a mortgage broker and got 2.625% when the market was 2.75%—the best deal of all three.

Same borrower, similar market conditions, but three completely different experiences and outcomes. The lender type mattered more than anything else.

Most people don’t understand that “mortgage lender” is an umbrella term covering four very different business models: retail banks, credit unions, mortgage brokers, and online lenders. Each has different pricing, service models, and strengths. Choosing the wrong type for your situation can cost you tens of thousands of dollars—even if you pick a “good” lender within that type.

Let me break down exactly how each lender type works, what they cost, and which scenarios favor each option so you can make the right choice.

The Four Lender Types Explained: Business Models and Pricing

Retail Banks: Selling Their Own Products at Retail Markup

How they work: Banks like Chase, Wells Fargo, and Bank of America originate mortgages using their own money (from depositors), underwrite them using their own underwriters, and either keep them in portfolio or sell them to Fannie Mae/Freddie Mac. You work with a loan officer who is essentially a salesperson for that one bank’s products.

Pricing model: Retail markup. Banks buy money from the Federal Reserve at one rate (let’s say 5.0%) and sell it to you at a higher rate (let’s say 6.25%). That 1.25% spread covers their operational costs (branches, staff, marketing) and profit margin. Big banks have high overhead, so they charge higher rates to cover it.

Typical costs:

• Interest rates: 0.25%-0.75% above broker/credit union pricing
• Lender fees: $2,000-$3,500 (origination, underwriting, processing)
• Application fees: $300-$500 (sometimes)

What you get: Brand recognition, physical branches, one-stop banking services, existing relationship benefits (maybe).

What you give up: Competitive pricing, flexibility, access to multiple loan products.

Credit Unions: Member-Owned Nonprofits with Better Pricing

How they work: Credit unions are nonprofit cooperatives owned by their members. They originate mortgages using member deposits and return profits to members through lower rates and fees instead of paying shareholders. You must qualify for membership (employment, location, family connection, or association membership).

Pricing model: Lower markup. Credit unions have the same base costs as banks but operate as nonprofits with lower overhead (fewer branches, less advertising, smaller executive salaries). They pass savings to members through rates typically 0.125%-0.375% lower than big banks and fees that are 40-60% lower.

Typical costs:

• Interest rates: 0.125%-0.375% below bank pricing, but 0.125%-0.25% above broker wholesale pricing
• Lender fees: $800-$1,500 (much lower than banks)
• Application fees: Usually $0

What you get: Better pricing than banks, flexible underwriting, member-focused service, relationship building.

What you give up: Cutting-edge technology, extensive branch networks, some specialty loan programs.

Mortgage Brokers: Shopping 20-50 Wholesale Lenders on Your Behalf

How they work: Brokers don’t lend their own money. They’re intermediaries who take your loan application and shop it across 20-50 wholesale lenders (the lending divisions of banks, credit unions, and mortgage companies that don’t deal directly with consumers). They submit your application to the lender offering the best rate and terms, then manage the process to closing. They’re paid by the lender through wholesale pricing discounts—lenders offer lower rates to brokers than they offer to retail customers because brokers bring volume and handle the customer service.

Pricing model: Wholesale pricing. When Wells Fargo quotes 6.50% to a retail customer, they might quote a broker 5.875% for the same loan because the broker is bringing them a completed, pre-qualified application with less marketing cost. The broker keeps some of that discount as their commission (typically 1%-2.75% of the loan amount, paid by the lender) and passes the rest to you as a better rate.

Typical costs:

• Interest rates: 0.25%-0.625% below bank/credit union pricing (wholesale access)
• Lender fees: $0-$1,500 (many brokers charge $0 and make money from lender-paid compensation)
• Application fees: Usually $0

What you get: Best rates, access to 20-50 lenders simultaneously, expert loan matching, fast closings.

What you give up: Brand name comfort, consistent lender relationship, dealing with a middleman instead of directly with the lender.

Online Lenders: Low Overhead, Digital-First, Competitive Pricing

How they work: Companies like Rocket Mortgage, Better.com, and LoanDepot operate primarily online with minimal physical presence. They originate, underwrite, and fund mortgages but do almost everything digitally. Low overhead (no branch networks, smaller staff) allows competitive pricing.

Pricing model: Low-cost retail. Online lenders operate like banks (lending their own money) but with drastically lower costs. They compete aggressively on rates to attract tech-savvy borrowers who don’t need in-person service.

Typical costs:

• Interest rates: Competitive with credit unions, often 0.125%-0.375% below big banks
• Lender fees: $0-$1,200 (many advertise $0 lender fees)
• Application fees: Usually $0

What you get: Speed, transparency, low costs, 24/7 digital access, straightforward loan programs.

What you give up: Personal relationships, local expertise, flexibility on complex scenarios.

The Real Cost Comparison: Same Loan, Four Different Lender Types

Let’s look at a real scenario with actual numbers. Borrower: 700 credit score, 20% down, $400,000 purchase price, $320,000 loan amount, 30-year fixed conventional loan.

Big Bank (Wells Fargo, Chase, BofA)

• Interest rate: 6.625%
• Monthly payment: $2,053
• Lender fees: $2,800
• Total closing costs: $10,200
• 30-year interest paid: $419,080
• Total cost of loan: $739,080

Local Credit Union

• Interest rate: 6.375%
• Monthly payment: $2,001
• Lender fees: $1,200
• Total closing costs: $8,600
• 30-year interest paid: $400,360
• Total cost of loan: $720,360

Savings vs. bank: $52/month, $18,720 over 30 years, plus $1,600 lower closing costs = $20,320 total savings

Mortgage Broker (accessing wholesale lenders)

• Interest rate: 6.00%
• Monthly payment: $1,919
• Lender fees: $0 (lender-paid compensation)
• Total closing costs: $7,400
• 30-year interest paid: $370,840
• Total cost of loan: $690,840

Savings vs. bank: $134/month, $48,240 over 30 years, plus $2,800 lower closing costs = $51,040 total savings

Savings vs. credit union: $82/month, $29,520 over 30 years, plus $1,200 lower closing costs = $30,720 total savings

Online Lender (Rocket Mortgage, Better.com)

• Interest rate: 6.25%
• Monthly payment: $1,970
• Lender fees: $0
• Total closing costs: $7,400
• 30-year interest paid: $389,200
• Total cost of loan: $709,200

Savings vs. bank: $83/month, $29,880 over 30 years, plus $2,800 lower closing costs = $32,680 total savings

Savings vs. credit union: $31/month, $11,160 over 30 years, plus $1,200 lower closing costs = $12,360 total savings

The Bottom Line

For this exact scenario, the mortgage broker delivers the best deal—saving $51,000 over a big bank and $30,000 over a credit union. The online lender is second-best, and the credit union beats the big bank by $20,000.

But this doesn’t mean brokers always win. Let’s look at when each lender type makes sense.

When to Choose a Big Bank

I know what you’re thinking: “Why would anyone choose a big bank after seeing those numbers?”

Here are the rare scenarios where big banks make sense:

1. You Have Significant Assets with the Bank and Get Relationship Pricing

Some banks offer 0.25%-0.5% rate discounts if you have $250,000+ in deposits, investments, or retirement accounts with them. Chase offers this. Bank of America offers it. Wells Fargo offers it.

If you’re getting a true relationship discount (verify this in writing on your Loan Estimate), a big bank might be competitive with credit unions or even brokers. Most people don’t qualify for these discounts, but high-net-worth clients sometimes do.

2. You Value One-Stop Convenience Over Savings

If you’re refinancing and already have your mortgage with your bank, keeping everything in one place might be worth $10,000-$20,000 to you. Some people prioritize simplicity over optimal pricing.

I wouldn’t make this choice, but I understand why busy professionals with more money than time might.

3. You’re Getting a Jumbo Loan and Your Bank Has a Portfolio Program

Some big banks keep jumbo loans in their own portfolio instead of selling them to Fannie/Freddie. This can allow more flexible underwriting on complex properties or income situations.

For high-net-worth borrowers with unusual circumstances (large investment portfolios, international income, unique properties), certain banks have programs brokers can’t access.

But even here: Compare with a jumbo specialist broker first. They have access to portfolio lenders too, often with better pricing.

When NOT to use a big bank:

• You have average credit and straightforward income (W-2, standard property)
• You’re looking for the best deal and willing to shop
• You’re self-employed or have complex income
• You have middle-range credit scores that need manual underwriting
• You’re doing a cash-out refinance and want the best LTV options

When to Choose a Credit Union

Credit unions hit the sweet spot for many borrowers: better pricing than banks, more personal service than online lenders, and more flexibility than big banks.

1. You Have Middle-Range Credit (640-700) and Need Flexible Underwriting

Credit unions are significantly more flexible on borderline credit situations:

• Big banks: Require 680+ for competitive pricing, 700+ for best rates, tons of overlays
• Credit unions: Often approve 640-660 scores with manual underwriting, fewer overlays, relationship-based decisions
• Brokers: Have access to flexible lenders too, but credit unions combine flexibility with lower fees

If you have a 680 credit score, $30,000 in student loans, and 10% down, credit unions will likely give you the best combination of approval odds and pricing.

2. You Want Personal Service Without Paying Big Bank Premiums

Credit union loan officers are members of the same community. They’re not salespeople trying to hit quotas—they’re neighbors helping neighbors. You get:

• Loan officers who return calls same-day
• Underwriters willing to call you directly to resolve issues
• Flexible fee waivers for good members
• Relationship building that benefits you long-term

This matters: One credit union I know called a borrower whose appraisal came in $15,000 low and offered him a construction loan add-on to make needed repairs so the home would appraise properly, then converted it back to a standard mortgage. A big bank would have just denied the loan.

3. You’re Buying Rural Property or Non-Standard Properties

Local and regional credit unions understand their markets better than national banks:

• Rural land with manufactured home: Credit union says yes, bank says no
• Mixed-use property (retail below, residential above): Credit union has portfolio options, bank requires standard purchase
• Property with non-permitted additions: Credit union underwrites to current condition, bank requires permits or denial

For anything outside cookie-cutter suburban houses, credit unions are often the only realistic retail option besides brokers.

When NOT to use a credit union:

• You need cutting-edge digital tools and 24/7 app access
• You’re in a rush and need 15-day closing (credit unions are usually 30-40 days)
• You want the absolute lowest rate regardless of service quality (brokers beat them by 0.125%-0.25%)
• You don’t qualify for membership and don’t want to join an association to become eligible

When to Choose a Mortgage Broker

Brokers deliver the best rates for most borrowers most of the time. Here’s when they’re unbeatable:

1. You Want the Absolute Best Rate and Lowest Fees

Wholesale pricing beats retail pricing. This is simple math:

• Retail bank: Marks up rates to cover high overhead and profit
• Credit union: Lower markup but still retail pricing
• Broker: Wholesale pricing that’s 0.25%-0.625% lower than retail, often with $0 lender fees

If you’re a competitive rate shopper and want to save $30,000-$60,000 over the life of the loan, compare broker quotes against bank and credit union quotes. Brokers win on price 80% of the time.

2. You Have a Complex Loan Scenario

• Self-employed (need bank statement loans or creative income documentation)
• Recent credit event (bankruptcy, foreclosure, short sale within 2-3 years)
• Investment property with complex rental income calculations
• Cash-out refinance above 70% LTV that many retail lenders won’t do
• Non-QM loans (foreign nationals, no income verification, jumbo with high DTI)

Brokers have access to 20-50 lenders with different overlays, programs, and appetites for risk. One lender might deny your self-employment income documentation while another approves it easily. A broker knows which is which.

3. You’re in a Competitive Market and Need Fast Closing

Experienced brokers close loans in 18-25 days consistently:

• They know each lender’s exact documentation requirements
• They submit complete, clean files that don’t get delayed in underwriting
• They have direct relationships with underwriters and processors
• They know which lenders are fastest for which property types

If you’re buying in Seattle, Austin, or Denver where sellers receive multiple offers, a 21-day closing with a proven broker beats a 45-day closing with a big bank even if the bank’s rate is 0.125% better.

Proof: I’ve seen buyers win contracts with 0.25% higher rates because they could close in 18 days vs. 45 days. The seller values certainty over a buyer’s interest rate.

4. You Value Expert Guidance and Program Matching

A good broker is like having a mortgage consultant:

• They know which lenders approve which credit profiles
• They match your scenario to the best program across 40 lenders instead of offering you whatever one bank has
• They explain trade-offs clearly (pay 0.25% higher rate to avoid $3,000 in fees? Here’s the break-even analysis)
• They manage the entire process and troubleshoot issues before they become problems

Retail banks: Your loan officer often has 6 months of experience and zero incentive to find you the best deal—they make the same commission regardless

Credit unions: Better service, but limited to one set of programs and underwriting guidelines

Brokers: Compensation tied to closing loans, so they’re motivated to get you approved, and they have 20-50 lenders to choose from

When NOT to use a broker:

• You distrust brokers and prefer dealing directly with a lender (brand name comfort)
• You’re in a state with limited broker access or high broker regulations
• You want a portfolio loan from a specific bank that doesn’t work with brokers
• You found a credit union offering 6.0% and brokers are quoting 6.125% (rare, but it happens)

When to Choose an Online Lender

Online lenders work best for straightforward, tech-savvy borrowers who don’t need hand-holding.

1. You Have Strong Credit (740+) and Simple W-2 Income

If you’re a salaried employee with clean credit buying a standard single-family home, online lenders offer:

• Same-day pre-approval (automated underwriting through apps)
• $0 lender fees (they make money from the rate, not from fees)
• Transparent pricing (no hidden fees or bait-and-switch)
• 24/7 account access (track your loan progress through an app)

You’ll save $10,000-$30,000 vs. a big bank and get a better digital experience than a credit union provides.

2. You Value Speed and Transparency Over Personal Relationships

Online lenders are transaction-focused, not relationship-focused:

• Upload documents through an app rather than faxing or emailing
• Get automated updates instead of waiting for loan officer callbacks
• Receive instant rate quotes instead of scheduling phone calls
• Close in 21-28 days with predictable timelines

If you prefer efficient digital processes over chatting with a loan officer, online lenders are ideal.

3. You’re Refinancing a Straightforward Loan

Refinances are simpler than purchases (no seller, no contract, no appraisal contingencies). Online lenders excel at refinances:

• They pull your existing loan data automatically
• They order appraisals electronically
• They verify employment and income digitally
• They close fast (21-25 days typical for refis)

For a simple rate-and-term refinance on a standard property with W-2 income, online lenders often beat everyone on speed and cost.

When NOT to use an online lender:

• You have complex income (self-employed, commission, 1099)
• You have credit issues requiring manual underwriting
• You’re buying a non-standard property (rural, mixed-use, multi-family)
• You need a loan officer who explains every step (online lenders provide limited human contact)
• You’re applying for specialty programs (non-QM, construction, HELOC)

The Ugly Truth About Lender Loyalty

Here’s what most people don’t realize: lenders don’t reward loyalty with better pricing.

Your bank doesn’t care that you’ve had checking, savings, and a credit card with them for 15 years. They’ll quote you 6.5% while a competitor quotes 6.0% for the same loan. Banks count on customer inertia—people assume their bank will “take care of them” so they don’t shop around.

The numbers prove this: The Consumer Financial Protection Bureau found that borrowers who compare at least 3 lenders save an average of $3,000 in closing costs and secure rates 0.2%-0.3% lower than single-lender shoppers. Over 30 years, that’s $30,000-$60,000 in savings for a few hours of comparison work.

Loyalty to a lender who doesn’t offer competitive pricing is just expensive sentimentality. Shop around. Compare multiple lender types. Your future self will thank you.

My Recommendation: Compare All Four Types

Unless you’re absolutely certain about your scenario, submit applications to 4-5 lenders spanning different types:

1. One mortgage broker (to access wholesale pricing across 20-50 lenders)
2. One local credit union (for flexible underwriting and good service)
3. One online lender (for competitive pricing and speed)
4. Your current bank (as a baseline comparison)

Submit all applications within 14 days (counts as one credit inquiry), then compare the Loan Estimates you receive. Let the numbers decide.

Most common outcome: The broker delivers the best rate and lowest total cost. The credit union is second-best with better service. The online lender is competitive with the credit union. The big bank is 0.5% higher and you wonder why you even bothered.

But occasionally the credit union surprises you with a special program, or the online lender runs a promotion, or your bank actually honors your relationship with a real discount.

The only way to know is to compare. Start with a broker, add a credit union, throw in an online lender, and see who wins.

Don’t guess. Don’t assume. Don’t accept the first offer. Your mortgage is probably the largest financial transaction of your life—spend three hours shopping like it matters, because it does.