You might wonder what happens to your loan when you buy a home. Even if you don’t notice, mortgage investors keep the real estate market working smoothly. Sometimes, your loan servicer is reassigned.
Lenders will often sell your loan, so it is beneficial to know how it works and what it means for you. We’ll explain why mortgage companies sell your loan, who mortgage investors are, how loans are transferred, and how this affects you.
What Is a Mortgage Investor?
Your mortgage lender and your servicer are two important parties involved in your homebuying process.
- Mortgage lender: The financial institution or bank that provides the loan to you.
- Servicer: The company that handles your actual loan payments.
A mortgage investor buys the loan from mortgage lenders. Lenders will sell your loan to free up capital and give out new loans. Examples of mortgage investors are government-sponsored entities such as Fannie Mae and Freddie Mac or government agencies such as FHA, USDA, and VA. By ensuring there is always money available for new home loans, mortgage investors keep the housing market stable.
Government-Sponsored Entities: Fannie Mae and Freddie Mac
Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) are government-sponsored entities (GSEs). They buy home loans from lenders, package them into mortgage-backed securities, and sell them to investors. This process provides lenders with more money to issue new loans, helping to keep the mortgage market stable and accessible. By doing this, Fannie Mae and Freddie Mac ensure a steady flow of funds in the housing market, making it easier for people to get home loans.
Government Agencies and Mortgages
These government agencies buy mortgages that meet their guidelines. By buying these loans, the agencies help lenders have more money to offer new loans.
- FHA (Federal Housing Administration): Buys loans insured by the FHA to help more people qualify for home loans.
- USDA (United States Department of Agriculture): Buys loans for homes in rural areas to encourage rural development.
- VA (Department of Veterans Affairs): Buys loans that offer benefits to veterans, active service members, and their families.
Why Do Lenders Sell Mortgages?
Lenders sell mortgages for two main reasons:
- Free Up Money: Selling mortgages helps lenders get more money to lend to new home buyers. This keeps the mortgage market active.
- Quick Funds: Lenders make money from the interest on your loan over 15 or 30 years. But selling your mortgage lets them get cash faster.
To keep the system working smoothly, your loan papers will say if your mortgage can be sold to another investor.
Will My Loan Change After Being Sold?
No, your loan details such as the mortgage rate and terms will stay the same when a mortgage company sells your loan. These details are set in your contract.
However, your loan servicer might change. If your lender sells your loan, you might have a new company handling your payments. Sometimes, the same lender will still service your loan, so you won’t notice any difference. If there is a change, you’ll get a notice with all the details and contact information for the new servicer. Always check mail and emails from your lender for updates.
What To Expect If Your Loan Servicing Transfers?
It’s normal for your loan servicer to change if your mortgage is sold. You’ll get a notice with your new servicer’s details. You’ll need to set up a new online account and direct deposit with them. Act quickly to avoid late payments.
If a payment is missed due to the transfer, contact both your old and new servicers to resolve it. Payments made to the old servicer within 60 days of the transfer won’t be considered late. Always stay in touch with both providers to ensure smooth transitions.
The Main Point
Mortgage companies often sell home loans to other companies. If this happens with your loan, don’t worry. Usually, nothing changes, and you keep making payments as before.
If your loan servicer does change, your old lender will tell you, and your new servicer will give you instructions on setting up a new account. If you have questions, contact both the old and new providers to understand the process.
At DSLD, our expert team will enabling you to manage the mortgage process confidently and easily by providing you with customized advice and guidance.
Contact us today for a free consultation with one of our expert Loan Officers.
