Mortgage Financing

In a typical year, most buyers take out a mortgage to finance their home purchase, most commonly 30-year, fixed-rate financing using a conforming loan. That’s a loan that’s packaged into a security by Fannie Mae or Freddie Mac and sold to investors on Wall Street. The two secondary mortgage market companies guarantee the securities, making them attractive to investors all around the world. Many other buyers use financing backed directly by the federal government through FHA, the U.S. Department of Veterans Affairs, or the Rural Housing Service, a division of the U.S. Department of Agriculture. Jumbo loans, which are loans outside the conforming loan limit, are the largest type of privately funded, privately insured mortgages. Many lenders also make loans underwritten on a proprietary basis and held in their own portfolio to help borrowers who don’t fit into standardized underwriting boxes but who represent reasonable credit risks.