What You Should Know about the Primary Mortgage Market for the Real Estate License Exam - dummies

What You Should Know about the Primary Mortgage Market for the Real Estate License Exam

By John A. Yoegel

The primary mortgage market, sometimes referred to as primary lenders on the Real Estate License Exam, is where consumers go to borrow money to buy real estate. Although all of these institutions make loans directly to the public, some specialize in large projects, commercial properties, or residential properties. The list of typical primary lenders includes the following:

  • Commercial banks and savings and loan associations: These lenders are sometimes collectively referred to as institutional lenders. These institutions lend money for anything from the purchase of a single-family house to a regional shopping center. These institutions are one of the principal places the average consumer goes to borrow money to buy a house.

  • Credit unions: These institutions primarily are oriented toward lending money to the average homebuyer — consumers. Credit unions can be very popular for these types of loans, depending on the amount of assets upon which they can rely and the interest rates they charge.

  • Insurance companies: These lenders tend to specialize in lending for large projects, such as the construction or purchase of large office buildings or shopping centers. The average homebuyer wouldn’t borrow money from an insurance company to finance the purchase of the property.

  • Investment groups: These groups of individuals or companies pool their money to make mortgage loans. They lend money for large real estate projects rather than to individual homebuyers.

  • Mortgage banking companies: These companies are set up by investors specifically to make mortgage loans. Unlike banks or credit unions, they don’t generally offer other banking services.

  • Pension funds: Pension fund managers may lend money from their fund’s assets for the construction of large real estate projects or purchases. Pension fund loans tend not to be made to individual home purchasers.

Mortgage brokers usually are considered to be part of the primary mortgage market, even though they don’t lend money directly for mortgages. A mortgage broker is similar to a real estate broker, except that instead of bringing a buyer and seller together, a mortgage broker brings a borrower and lender together.

Be sure to check out the basic requirements for becoming a mortgage broker in your state. The key elements you’re looking for are whether licensing or registration is required with some state agency, the state agency involved, and whether you must meet any financial, educational, or experience requirements under state law.

In the wake of the financial downturn in the housing market in 2008, states have tightened up their policies regarding mortgage brokers. Exam writers like to ask a question about the criteria to be a mortgage broker and what mortgage brokers do.