What is the difference between primary and secondary mortgage markets?

The primary mortgage market is where loans are originated, meaning that this is the stage where borrowers directly interact with lenders to secure financing for home purchases or refinancing. This market includes banks, credit unions, and mortgage lenders who provide the loans based on the borrower's creditworthiness and the property's value.

On the other hand, the secondary mortgage market allows for the buying and selling of existing mortgages. In this market, lenders can sell the loans they have originated to investors or other financial institutions. By doing so, they generate liquidity that enables them to issue more loans. This market plays a crucial role in providing stability and funding for the primary market.

Choosing this answer highlights the fundamental functions of both markets, illustrating how they complement each other in the overall real estate finance system. The other options mischaracterize either the scope or the operations within these markets, leading to confusion regarding their roles in mortgage financing.