What is the primary mortgage market?

The primary mortgage market is defined as the marketplace where loans are originated, meaning this is where lenders provide mortgages directly to borrowers. This process involves the initial application for loans, underwriting by lenders, and the actual disbursement of funds to finance the purchase of real estate. The loans created in this market are typically for residential properties and are made by various types of lenders, including banks, credit unions, and mortgage companies.

This concept is central to understanding how home financing works because it highlights the initial stage of the mortgage lending process, setting the foundation for the secondary mortgage market, where those loans may be sold or traded. In the primary market, the focus is on establishing new loan agreements and facilitating transactions directly between borrowers and lenders, which differs from other options that either involve aspects of the mortgage process that do not include loan origination or focus on specific types of loans.