If you are a homeowner in the process of refinancing your mortgage, doing your homework will save you thousands of dollars. Before you can make sense of mortgage offers and determine which offer is a better loan, it helps to understand how mortgage lenders operate. Here are the basics of mortgage markets and the different types of lenders you will encounter refinancing your mortgage.

There are two basic markets in the mortgage industry. The first is the Primary Market, where the borrower obtains their mortgage from the loan originator. The Secondary Mortgage Market is where lenders buy and sell debts that are pooled and insured. How does this affect you, the homeowner? The value of your mortgage on the secondary market is determined by how much the loan’s originator overcharged you. Profits on the secondary market are icing on the cake for mortgage lenders.

Back to Primary Mortgage Lenders: these are your banks, credit unions, mortgage banks, internet portals, and home builder/Real Estate Company owned lenders. When you apply for your mortgage you are dealing with retail mortgage lenders. These lenders have one goal for your loan: overcharge you as much as they can, and if possible without your knowledge. Banks and mortgage banks have an advantage as they are exempt from all the disclosure laws in the United States that protect homeowners. This is why you should never take out a mortgage from your bank.

The Secondary Mortgage Market includes pseudo-government for profit companies Fannie Mae, Freddie Mac, and Ginnie Mae. These organizations regulate the mortgage industry for the government and create mortgage based investments from secured debts. There are also investors in the secondary market that purchase debt from primary lenders looking for a return on their investment. You may be asking yourself, “Why do I need to know any of this?” The answer is simple, your mortgage loan is like any other product you purchase. If you neglect to shop around you will not find the best price.

You can learn more about shopping for the most competitive mortgage loan and not overpaying the loan originator by registering for a free mortgage guidebook