Different secondary lenders have different guidelines that must be met before they will buy a loan. For example, Fannie Mae and Freddie Mac have a limit on the loan amount they can purchase for each loan. The limit changes as real estate prices change, and it is different in different regions of the country. Also, many of the participants in the secondary market only buy certain types of loans. To meet these guidelines, many originating lenders specialize in a particular type of mortgage. This helps the primary lender know who will be buying the loans it makes and if it will have a problem selling them on the secondary market.
Armed with that knowledge, a smart borrower shops around for a lender that specializes in the type of loan he or she wants. That lender will be more knowledgeable and more efficient in obtaining that type of loan. Understanding which loan is best for you should be the focus.
However, many lenders will simply try to sell you the loan they know best because it is easier for them. If it is not the loan that is best for you, do not stay with that lender.
There is a secondary market for all loans, even those made by individuals selling their homes and providing the financing to the buyer themselves. It consists of individuals and companies that specialize in buying these mortgages. Without the larger players, this is a much smaller market. Since these mortgages are usually sold at a substantial discount (much less than their face value), it may be more difficult to find a lender providing loans that can be sold in this market. The buyers in this secondary market have their own guidelines, which may be very different from those of the large institutions like Fannie Mae and Freddie Mac.
A lender can make a mortgage loan without following anyone’s guidelines, as long as the loan does not violate the law. Any lender planning to keep the loan for its own portfolio follows its own guidelines.