Mortgage brokers are not like travel agents, who often save money by pocketing the commission when they arrange their own trips. The home loan market doesn't work that way and the travel market won't be working that way much longer either, but that's another story.

Generally, home loans are distributed through two major distribution channels, retail and wholesale. Most large lenders in the US operate through both channels.

Lenders using the retail channel employ and support loan officers, who are paid largely by commission. They also must employ salaried loan processors who do all the detailed work involved in developing the file of information about an applicant. The prices delivered to their loan officers to be quoted to applicants are "retail" prices because they cover all these distribution costs.

Lenders using the wholesale channel of distribution use mortgage brokers, independent contractors who typically deal with multiple lenders. The mortgage brokers find the borrowers and process the loans. Large brokerage firms employ their own loan officers who work very much like those employed by lenders operating at retail. The difference is that loan officers employed by mortgage brokers can offer the loans of multiple lenders.

Lenders using the wholesale channel shift the costs involved in marketing and processing loans to the brokers. Lenders quote wholesale prices to brokers, who add a markup to derive the retail price they offer to potential borrowers. These prices can be higher or lower than those quoted by loan officers employed by lenders operating at retail.