A mortgage investor is the party that buys mortgages from lenders. In most cases, these investors are actually government entities or government-sponsored companies that buy your mortgage loan so that your lender can continue to sell new mortgage loans. An investor is the entity that buys mortgages from lenders and can also be a mortgage aggregator. Investors include Fannie Mae and Freddie Mac, who purchase conventional loans, and Ginnie Mae, which buys loans from the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA).
Lenders can make money by charging fees when the loan originates, earning interest on monthly payments, and selling it for a commission. This is achieved too slowly to be of much use, since lenders need the liquidity to lend large amounts of money to other homebuyers. After you buy a home, you may receive a letter stating that your mortgage loan was purchased by an investor. Lenders are one of the first steps to buying a home, considering that the borrower will need to find an interest rate that fits their financial situation.
Once Fannie or Freddie buy a mortgage from a lender, they sell that same mortgage in the form of securities on the bond market. Fannie and Freddie set the standards for a compliant mortgage, providing uniformity to buyers in the secondary market. Before you can answer the question of who buys mortgages in the secondary market, you need to know how mortgages work. Fannie and Freddie buy mortgages that meet agency criteria and then group groups of loans (often referred to as mortgage funds) and sell mortgage-backed securities, which are bonds that generate interest and principal payments from a specific set of loans.
