To identify the right lender, you must first have a clear understanding of the various types of lenders available. The home financing system in the United States includes many private and public institutions. Home mortgages are made and processed by primary market lenders and these mortgages are often insured and/or sold to "secondary market" institutions. Although the types of lenders originating mortgage are growing, there are five categories of "primary market" lenders active in the residential lending market. They include:

• Commercial Banks that primarily specialize in consumer and construction lending.

• Savings and Thrift Institutions that provide residential mortgages. They are regulated and their deposits are insured bye FDIC(Federal Deposit Insurance Corporation) or corresponding state agencies.

• Mortgage Bankers that are independent firms or subsidiaries of commercial banks that originate mortgages. They focus exclusively on providing mortgages and they do not accept deposits. They typically originate mortgages and sell them to other financial institutions. These purchasers constitute the "secondary market". Mortgage Bankers are not federally regulated like commercial banks.

• Mortgage Brokers who differ from mortgage bankers in that they do not actually make loans. Instead, they operate as "correspondence" for a variety of lenders and process loans that are actually originated by the lenders. Mortgage brokers are familiar with different lines of products and can assist a homebuyer in locating financing with unique or less than perfect credit. Mortgage brokers are also not regulated like commercial banks.

• Credit Unions that are private banking organizations that frequently have very good mortgage rates for its members. A number of credit unions will offer first mortgages to its members. Credit unions are generally regulated by federal or state agencies.

• You should use the service of the lender that best suit’s your needs based on location, type of products offered, and the quality of service they provide.

The term "secondary market" refers to financial institutions that purchase mortgage loans originated by other lenders. They are often large banks, life insurance companies, pension funds and federally or state chartered institutions. The most significant purchasers of mortgages on the secondary market are Fannie Mae and Freddie Mac. Both are large, shareholder-owned and privately managed corporations. They are federally chartered and have federal statutory obligations to serve the needs of lower income households and other underserved populations. As a result, both organizations have made affordable new lending products available to originating lenders.

Ginnie Mae plays a similar role as Fannie Mae and Freddie Mac. They all purchase government insured or financed mortgages. However, unlike Fannie Mae and Freddie Mac which are quasi government corporations, Ginnie Mae is a government corporation under the jurisdiction of the Department of Housing and Urban Development (HUD).

The secondary market allows lenders that originate residential mortgages to sell some or all of their portfolio to secondary market purchasers. By doing so, lenders can replenish their cash so that additional financing can be made available. The underwriting and other criteria set by the secondary market greatly impacts the lending practices of most mortgage lenders.

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