A bank, credit union, or mortgage company evaluates a buyer’s application and provides the funds to purchase a home. That institution is the lender. In return it receives a promissory note and a security interest in the property.

Lenders set underwriting standards for credit, income, assets, and property value. They may keep the loan in portfolio or sell it into the secondary market. Servicing—collecting payments and managing escrow—can be handled by the original lender or transferred to another company.

Borrowers compare lenders on interest rates, fees, customer service, and program availability. Relationship and communication quality often matter as much as the rate when problems arise. The lender’s risk is tied to the borrower’s ability to pay and the property’s value as collateral.

• Institution that provides mortgage funds
• Evaluates credit, income, and collateral
• May hold or sell the loan
• Secured by the financed property