Underwriting is the lender's process of evaluating a borrower and the property the borrower wants to buy. The borrower must be creditworthy, and since the property will act as security for the debt, the documents gathered during the loan process must show that its value meets or exceeds the amount of money that will be lent. That's important, because if the borrower stops making payments and forces to lender to take the property back, the lender wants to make sure it can quickly sell the property and recover its investment.

The secondary market members, especially Fannie Mae and Freddie Mac, have worked with the Department of Housing and Urban Development, known as HUD, to develop underwriting guidelines that help lenders determine which borrowers are more likely to have problems making payments after a loan is granted. Originators who plan to sell their loans on the secondary market must follow the guidelines very carefully. If they don't, their loans won't be marketable.

Applicants with a favorable credit history are granted loans that require a lower down payment than borrowers who have had prior credit problems. Good credit usually equals a lower interest rate, too. The loan package that you — or your buyers — will be offered is based on risk studies that secondary market lenders have done on past loans throughout the United States. So even though you don't deal with them firsthand, secondary market members play a big part in your ability to finance real estate.