Institutional and/or Private Lenders (home mortgage loans)

Lenders are either of the private or institutional stripe. Commercial banks, savings and loans, and credit unions are all institutional lenders. When you borrow from them, you'll be qualified according to industry guidelines, and the mortgage will be based on factors that include your credit score, income, and household expenses.

Private lenders are individuals or corporations who aren't obligated to follow federal government guidelines. Their loans are not government-insured, and they often lend money in such a way that doesn't reflect the guidelines of institutional lenders.

Primary and Secondary Markets and Home Mortgage Loans

When you go to your bank and apply for a typical retail mortgage, you're participating in the "primary" market. The "points" you pay at closing are where the primary lender makes money.

They later sell their mortgages to investors, who make money on the interest you pay over time. These investors are part of the so-called "secondary" market.

The biggest players in this secondary market are the Federal National Mortgage Association ("Fannie Mae"), the Government National Mortgage Association ("Ginnie Mae"), and the Federal Home Loan Mortgage Corporation ("Freddie Mac").

Conforming and Non-Conforming Home Mortgage Loans

Conventional loans are generally broken into two categories: "conforming" and "non-conforming." A conforming loan adheres to strict Fannie Mae/Freddie Mac loan guidelines, including an analysis of your gross income to ensure that you can pay your monthly mortgage. This reduces the risk to the lender, and allows the loan to be sold to Fannie Mae or Freddie Mac.

"Non-conforming" loans are riskier for the lender, and may carry higher interest rates for consumers. On the plus side, they often have less restrictive criteria for mortgage applicants. If you're denied a conforming loan, the relaxed requirements of the non-conforming variety may make it easier for you to obtain one.