It’s natural to want to put a human face to the seeming randomness of who exactly determines the rate of your new mortgage, and a major hint is that it does not come from your lender. Indeed, your past credit performance plays a role, as does the location of your new home and several other factors, but if you absolutely need a name to put with the numbers, you can use either Fannie Mae or Freddie Mac.
As a starting point, the following seven factors help determine your mortgage interest rate:
As mentioned, these are the starting points for calculating your mortgage rates, but the secondary market plays a critical role in determining your final interest rate.
Without the secondary real estate market, which allows lenders to sell your mortgage to another investor quickly and a profit, they would be less able to offer new loans to the next homebuyer because their money would be tied up until you slowly paid your loan over a 30-year period. Clearly, this is an unsustainable lending model. Instead, lenders turn to the huge financial giants, Fannie Mae or Freddie Mac to broker the deal. As such, your mortgage payment is largely determined on the secondary market, as lenders will offer you a rate that they know secondary investors are willing to pay.