In order to find the best mortgage product for you, it is important to first understand what a mortgage is. A mortgage is a financial instrument typically used for the purchase of a house. A borrower receives a loan for the purchase (or refinance) of a house which is, in turn, secured or collateralized by that house. An arrangement is made for regular payments over a period of time in order to pay off the loan. Usually, interest is charged to the customer in exchange for the loan.
Mortgages come in many forms and varieties, usually differentiated by the time period over which they are paid and the way interest is charged on the loan.

Over the years, the mortgage process has changed: no longer does your local banker loan you money which you will repay that bank over the next thirty years. Why? Banks could only lend the money that depositors had put in the bank. Because mortgages tend to be large loans, it isn't hard to imagine that small banks could very quickly lend all of the money that they were able to. Unless these banks received more deposits, or some of these loans were repaid, they were limited in the number of loans they could offer. In order to help smaller banks lend money to everyone who might come to them for a mortgage (and to improve the liquidity of the real estate market), Congress encouraged the development of FNMA (Fannie Mae) and FHMLC (Freddie Mac). These companies would purchase mortgages from banks, giving these banks money to lend again and again. FNMA and FHMLC, sensing that the American homeowner was a good investment risk, created mortgage backed securities, or bonds, based on these loans that could be sold on Wall Street to investors at a predetermined rate of return.

Over time, other companies also began to securitize mortgages, each with their own particular flavor of mortgages: some companies would purchase mortgages whose borrowers had blemished credit; others would accept loans where the borrowers' income could not be verified; others, still, would consider only larger loans. Each company developed their own appetite for mortgage products, in turn allowing the consumer more and more options. Cumulatively, these companies, along with the institutional investors that buy these securities, are often referred to as the secondary market.

Today, many secondary market companies exist, each with their own parameters for loans. This allows borrowers with a wide variety of circumstances, which previously might have presented problems for a bank, to have viable options when it comes time to obtain a mortgage.