What Are Basis Points?
A basis point (often abbreviated as "bp" or "bps") is a unit of measurement used in finance to describe the percentage change in value or rate of a financial instrument. One basis point equals 0.01%, or one-hundredth of one percent.
In mortgage lending, basis points are the standard way to express compensation. When you hear that a lender pays "200 bps" on a loan, that means the compensation is 2.00% of the loan amount.
Quick Reference:
- 100 bps = 1.00%
- 200 bps = 2.00%
- 275 bps = 2.75%
- 100 bps on a $300,000 loan = $3,000 gross commission
- 200 bps on a $300,000 loan = $6,000 gross commission
How Broker Compensation Works
In the broker model, compensation is typically expressed in basis points of the loan amount. When you close a loan through a wholesale lender, that lender pays the brokerage a commission based on the agreed-upon basis point structure.
The key difference from retail is transparency. In retail lending, the compensation structure is often opaque—the LO may not see the full spread the institution is earning on each loan. In the broker model, the basis point compensation is explicit, which means producers can evaluate exactly what each deal generates.
At NEXA, the compensation model is designed to give high-producing LOs a larger share of the gross commission than traditional retail models typically allow.
Why Basis Points Matter in Platform Evaluation
When evaluating a platform, basis points alone don't tell the full story. You need to understand:
- What's the split? The gross basis points from the lender are one number. What percentage of that goes to you vs. the platform?
- What's included? Does the platform's share cover processing, technology, support, and compliance? Or do those come out of your split separately?
- What's the volume lever? A slightly lower bps split on a platform that helps you close more deals can outperform a higher split where you close fewer.
- What about product mix? Different loan products often have different bps structures. A platform with broader product access gives you more ways to earn.
Example: Translating BPS to Real Dollars
Let's walk through a concrete example. Suppose you close 8 loans per month at an average loan amount of $350,000, with an average compensation of 200 bps (2.00%).
- Monthly volume: 8 × $350,000 = $2,800,000
- Gross commission at 200 bps: $2,800,000 × 2.00% = $56,000/month
- Annual gross commission: $56,000 × 12 = $672,000
Your take-home depends on your split with the platform. The point is to understand both the bps structure and the split so you can model your actual earnings.
Getting Your Personal Model
Every producer's situation is different—your volume, product mix, market, and goals all affect what the right model looks like. A private platform briefing gives you the specific numbers: how your current production volume would translate to NEXA's compensation structure, what your split would be, and what additional income streams might be available.
No obligation, no commitment—just the data you need to make an informed decision.