Tennessee Realtor State Practice Exam

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How does the secondary mortgage market benefit borrowers?

By ensuring loans are instantaneously approved.
By providing more varied mortgage options.
By ensuring funds are available to borrowers.
By lowering interest rates below market levels.

The correct answer is: By ensuring funds are available to borrowers.

The secondary mortgage market benefits borrowers primarily by ensuring that funds are available to them. In this market, lenders sell the mortgages they originate to investors. This process allows lenders to free up capital, enabling them to issue more loans to borrowers. As a result, the flow of funds in the secondary market facilitates greater access to mortgage financing. When lenders can recoup their funds by selling mortgages, they have the capacity to lend more, which ultimately increases the availability of funds. This continual cycle helps maintain liquidity in the mortgage market, supporting both new and existing borrowers in obtaining the financing they need to purchase homes. Understanding this concept highlights the role of the secondary mortgage market in creating a stable and responsive lending environment, which is crucial for borrowers looking for financing options.