When you look for a mortgage, you become an integral part of the primary mortgage market. To get a mortgage from a major lender, you can look for the best interest rate possible.

A strong primary mortgage market is heavily reliant on homebuyers. Here's everything you need to know.

What exactly is the primary mortgage market?

Potential homeowners turned to large lenders, offering mortgages to occupiers and investment properties in the primary mortgage market. Home loans originate in the primary mortgage market and are then sold to buyers in the secondary mortgage market.

The primary mortgage market is designed to help homebuyers achieve their homeownership goals. When you contact a lender for pre-approval, you enter the primary mortgage market. They will work with lenders in the primary mortgage market for the remainder of the home buying process until the property closes.

Primary Mortgage Lender:

The primary mortgage market is anything but standard. Instead, different lenders are involved in helping different types of borrowers get the mortgage they want.

Below are the different categories of lenders in the major mortgage markets.

A mortgage banker is a company or individual who lends money to a borrower with their own money or borrowed money.

A mortgage broker is someone who connects borrowers with potential lenders. Mortgage brokers act as intermediaries between borrowers and lenders.

A commercial bank is a financial company that provides banking services, such as savings and checking accounts, to customers. Commercial banks can also originate mortgage loans in the primary mortgage market.

Credit unions are not-for-profit financial institutions. Credit unions, like for-profit banks, can offer mortgages to borrowers.

Savings banks and credit institutions are comparable to typical financial institutions. Therefore, these companies can accept deposits and provide mortgages.

As mentioned earlier, lenders are all members of the large mortgage market. However, some companies that are often seen as prime lenders are not actually prime lenders. Freddie Mac and Fannie Mae are examples of this.

Fannie Mae and Freddie Mac's loans did not come from the primary mortgage market. Instead, the companies buy loans from lenders in the secondary market.

Different types of lenders make up the primary mortgage market. However, not all believers are the same. Therefore, it is important to spend some time learning how to choose a mortgage provider. The right mortgage lender can take the stress out of this process.

Mortgage Market: Primary vs Secondary

The primary mortgage market focuses only on borrowers looking for a mortgage lender. The secondary mortgage market is an entirely different beast.

Investors buy and sell existing mortgages generated by the primary mortgage market and packaged into mortgage-backed securities in the secondary mortgage market. After the loan is completed, it enters the secondary mortgage market.

The goal of the secondary mortgage market is to keep interest rates low. It does this by investors buying secured loans from lenders. The primary lender then has additional funds to lend to another borrower, thus repeating the cycle. Without a secondary mortgage market, lenders would be unable to lend to homebuyers, causing interest rates to rise.

So, as a potential home buyer, you will benefit from a cycle that allows lenders to keep interest rates low. After the mortgage is completed, the primary lender will most likely sell your loan on the secondary mortgage market.