That “write your own mortgage” thing; how to learn about it
"It sounds like you are describing ""seller-financed"" mortgages (also sometimes called ""self-financed"", where ""self"" is the seller).  In essence the buyer and seller enter into a legal contract (a promissory note) that specifies the payment schedule, interest rate, etc.  The nature of the agreement is similar to the kind of mortgage agreement you'd get from the bank, but no bank is involved; it's just an agreeement directly between the buyer and seller. If you search for ""seller-financed mortgage"" or ""self-financed mortgage"" you can find a good deal more info about this kind of arrangement.  Here is a useful article from Investopedia, here is one from Forbes, and here is one from Nolo. Broadly speaking, the advantages and disadvantages of seller financing are two sides of the same coin: by doing the agreement yourself without bank involvement, you can cut out procedural red tape, delays, and requirements that a bank might insist on --- but in so doing you may expose yourself to risks that those procedures are designed to shield you from.  Most obviously, as the seller, you receive only the down payment up front (not the entire purchase price, as you would if the buyer got a bank loan), and if the buyer doesn't follow through on the agreement, you're on your own as far as starting foreclosure, etc. You can read up on some of the linked pages for more details about the pros and cons.  In general, as those pages note, seller-financed mortgages are relatively rare.  A home is a big purchase, and if you don't know what you're doing it's easy to screw up in a way that could cost you a large amount of money if things go wrong." "The other answers are talking about seller financing.  There is another type of arrangement that might be described as ""writing your own mortgage,"" where the buyer arranges his (or her) own financing.  Instead of using a bank, a buyer might find his own investor to hold the mortgage for him. An example would be if I were to buy a house that needs fixing up.  I might be able to buy a house for $40,000, but after I fix it up, I believe it will sell for $100,000.  Instead of going through a traditional mortgage bank, I find an investor with cash that agrees the house is a good deal, and we arrange for the investor to provide funds for the purchase of the house on a short-term basis (perhaps interest-only), during which I fix up the house and sell it.  Just like a regular mortgage, the loan is backed by the house itself. I am not recommending this type of arrangement by any means, but this article does a good job of describing how this would work.  It is written by a real-estate guru with lots of training courses and coaching materials that she would like to sell you.  :)" If an entity or individual has full rights to the land and land improvements, they can hold, transfer, delegate, or dispose of them on their terms.  The only exception may be eminent domain.  If the sovereignty meets the public necessity or public purpose tests they can assume or change the rights to your property in exchange for compensation. As others have said writing your own mortgage falls under the category of seller financing.  A seller can write a mortgage with the help of a loan servicing company.  Some loan service companies report to credit agencies, to help with buyer refinancing at a later point. Other forms of seller financing: Leasing Land contracts mineral contracts  and more... Additionally, the seller can finance the minority of the property, called a junior mortgage.  For example, the Bank finances 79% of the value, the seller finances 11%, and the buyer's 10% down payment covers the rest.  If the buyer defaults, the superior mortgage (bank's) has collection priority. More commonly, the seller can option for a wrap-around mortgage or an 'all-inclusive mortgage'.  The seller holds or refinances the existing mortgage  and provides a junior mortgage in exchange for a secured promissory note and an all-inclusive trust deed.  If the buyer defaults, the seller has foreclosure rights. It is not uncommon for entities or people to use financing strategies other than the traditional mortgage if they are unable to exclude the gain on sale.  Check out section 1031 exchanges.  In almost all cases I would tell people not to make decisions based on tax consequences alone, if your financial objective/goal for seller financing sounds like a 1031 exchange, take exception and carefully consider the tax consequences. "You are asking about a common, simple practice of holding the mortgage when selling a house you own outright. Typically called seller financing.  Say I am 70 and wish to downsize. The money I sell my house for will likely be in the bank at today's awful rates. Now, a buyer likes my house, and has 20% down, but due to some medical bills for his deceased wife, he and his new wife are struggling to get financing. I offer to let them pay me as if I were the bank. We agree on the rate, I have a lien on the house just as a bank would, and my mortgage with them requires the usual fire, theft, vandalism insurance. When I die, my heirs will get the income, or the buyer can pay in full after I'm gone.  In response to comment ""how do you do that? What's the paperwork?"" Fellow member @littleadv has often posted ""You need to hire a professional."" Not because the top members here can't offer great, accurate advice. But because a small mistake on the part of the DIY attempt can be far more costly than the relative cost of a pro. In real estate (where I am an agent) you can skip the agent to hook up buyer/seller, but always use the pro for legal work, in this case a real estate attorney. I'd personally avoid the general family lawyer, going with the specialist here."
"Is english not your first language? I'm not trying to be rude i just want to understand if the difficulty in communicating with you comes from a language barrier or something else.  Finance and accounting knowledge are things people go to university for years for, just to learn the basics to get in the door. What you're asking requires years of experience and earned expertise.  The expectation that you can just post here with some questions and suddenly have enough of a grasp to become a decision maker with respect to these situations is borderline offensive to professionals like myself.  Either you need this knowledge for a practical application, or an academic pursuit. It seems to be the latter given your previous message. There are textbooks dedicated to what you're asking about, if you are really serious about learning then go pick them up and put in the hours necessary just like anyone else. Otherwise stop wasting peoples time on here.  If you have one or two small questions to help clarify something you've been self studying that's fine, but honestly coming on here and asking ""how can a company issue bonds and what are bonds is it like a mortgage"" is absolutely a waste of time and reeks of laziness on your part." You would need to check the original mortgage papers you signed with the originators.  Chances are you agreed to allow the mortgage to be sold and serviced by other parties. Refinancing would also put you in the same boat unless you got them to take that clause out of the mortgage/refinance papers. Also, chances are most small banks and originators simply can not keep mortgages on their books. There are also third parties that service loans too that do not actually own the mortgages as well. This is another party that could be involved out of many in your mortgage.  I would also not worry about 127/139 complaints out of 1,100,000 loans. Most probably were underwater on their mortgage but I am sure a few are legitimate complaints.  Banks make mistakes (I know right!).  Anyway, good luck and let me know if you find out anything different. "I dislike this argument that government pressure to make bad loans is the origin of subprime loans.   In fact, the term subprime is because those type of loans can't be underwritten by the government.  Usually the concept of government forcing bad loans, is government forcing banks to give minorities and low-income people loans for their first houses.   The government requires w-2 income and a base credit score to procure these loans.  At the peak of the bubble, the majority of home sales were for investment purposes, not homeownership purposes.   Those who declared the housing market was wildly unstable (and who were proven right) were talking about the problem of mortgage brokers being incentivized to lie about a person not being qualified for prime government loans, in order to make more money by putting them in lucrative subprime loans (or simply advising them they were better off in subprime and could get cash out up front!).  Also, liar no-doc loans were booming and speculators and house flippers were getting multiple properties in order to flip them for profit.  Once upon a time these speculators would make sure they could rent out the house for the carrying costs if they needed to.  0 down, 0 interest meant a whole different speculatory ballgame.    Ah, but maybe these speculators wouldn't have anyone to sell to if low income people couldn't get prime loans from the gov?  All evidence points to them selling to other speculators until there was no fool left to hold the bag.  See: Miami, Las Vegas, etc.  EDIT:  I forget that the argument has hopscotched from Fannie &amp;Freddie, to the end of redlining, to the CRA, and now to changes made to the CRA, where the argument finally gains a bit of traction: &gt; Law professor Michael S. Barr, a Treasury Department official under President Clinton,[63][131] stated that approximately 50% of subprime loans were made by independent mortgage companies that were not regulated by the CRA, and another 25% to 30% came from only partially CRA regulated bank subsidiaries and affiliates. Barr noted that institutions fully regulated by CRA made ""perhaps one in four"" sub-prime loans, and that ""the worst and most widespread abuses occurred in the institutions with the least federal oversight""  Further, the discussion devolves into whether the idea and enthusiasm of the rest started as a seed from the regulated banks, how much removing risk by Wall Street with non-government backed home loans through credit instruments had its origination in the CRA, and how much of the failure of ratings agencies to properly rate those credit instruments has to do with the US government and the CRA and not regular Wall Street greediness.  So originally I stated ""no relationship"" but yes, once you get into the complexity of it all I'm sure we could find a way to say a global mania in speculation in real estate is due to the American government getting poor people into their first home, and generally has nothing to do with the human condition of wanting something for nothing and getting excited when the government allows you to sell blue sky returns to foolish speculators." "Great explanation. I want to add 2 thing: 1) Credit rating agencies played there role in messing up the economy, by giving subprime (higher risk) mortgage backed securities AAA rating.  2) ""Other banks saw this happening and were forced to lower their requirements for issuing mortgages."" Well not banks, but mortgage brokers lowered there requirement from issuing mortgages. They even started to issue NINA (no income verification, no assets verification) loans!" "First, don't try to understand other people's finances. Family or a trust could provide the minimum down payment, or even large chunk of the price, leaving them with a small/manageable monthly mortgage.  More importantly, HGTV home buying shows are fake. Buyers don't actually buy, other people touring are just locals/ friends, and the entire plot is literally a written script.   Source: My best friend had 3 of his listings on one of the shows as the house options, and our friends were the ""other buyers"" on the tour." "I simply wrote my bank an email and said, ""I want to handle my own escrow"".  They said, ""fine"" and even let me set up a third account called ""escrow"" (savings and checking being the other two)  that I just transfer money into whenever I want.  But, I don't actually know what their requirements are for doing that. I have a ton of equity in the house, and I never missed a payment, AND I have direct deposit at that institution.  So, it can be done." "A person can finance housing expenses in one of two ways. You can pay rent to a landlord. Or you can buy a house with a mortgage. In essence, you become your own landlord. That is, insta the ""renter"" pays an amount equal to the mortgage to insta the ""landlord,"" who pays it to the bank to reduce the mortgage. Ideally, your monthly debt servicing payments (minus tax saving on interest) should approximate the rent on the house. If they are a ""lot"" more, you may have overpaid for the house and mortgage. The advantage is that your ""rent"" is applied to building up equity (by reducing the mortgage) in your house. (And mortgage payments are tax deductible to the extent of interest expense.) At the end of 30 years, or whatever the mortgage term, you have ""portable equity"" in the form a fully paid house, that you can sell to move another house in Florida, or wherever you want to retire. Sometimes, you will ""get lucky"" if the value of the house skyrockets in a short time. Then you can borrow against your appreciation. But be careful, because ""sky rockets"" (in housing and elsewhere) often fall to earth. But this does represent another way to build up equity by owning a house." When getting a mortgage it always depends on the bank and each bank may be more or less strict. With that being said there are rules and general guidelines which can help you understand how you fit in the world of mortgage approvals. If you can provide the same paper work as an employee of your company that you would normally provide from any other company then a bank may just accept that alone. However to me it seems like you will be looking at a new variation of what was known as a Self-certification mortgage A self-certification mortgage is basically a mortgage for those who   cannot prove their income. As a result of the housing collapse, the rules on a traditional self-cert mortgages have changed. As someone who is self employed, it is more difficult today to get a mortgage but is still possible. This article provides some good information: Can the self employed still get a mortgage? I advise doing some research on this topic and speaking with a professional mortgage broker.  Some Resources: Compare Self Cert Mortgages How to beat the mortgage famine in 2012 Can the self employed still get a mortgage? This is generally wrong. For the vast majority of the time that underqualified alt-a and option-arm mortgages were being written, Fannie and Freddie were not buying, and they were never huge holders of these mortgages. Fannie and Freddie have minimum qualifications standards. However, as time went on, Fannie and Freddie did load up on the securities (not the mortgages), which were of course still problematic.   But the liquidity crunch of 08 was not substantially contributed to by Fannie and Freddie. Are there any known laws explicitly allowing or preventing this   behavior? It's not the laws, it's what's in the note - the mortgage contract. I read my mortgage contracts very carefully to ensure that there's no prepayment penalty and that extra funds are applied to the principal. However, it doesn't have to be like that, and in older mortgages - many times it's not like that. Banks don't have to allow things that are not explicitly agreed upon in the contract. To the best of my knowledge there's no law requiring banks to allow what your friend wants. Can anyone recommend a good textbook that covers Fannie Mae and Freddie Mac, or more broadly the US home mortgage market? A basic search seems to mostly turn up books that aim to make an ideological point rather than attempt to provide an actual explanation.  I have a basic financial knowledge including a basic understanding of derivatives at the level of say the textbook by Hull, but know very little about the US mortgage market specifically. I don't mind technical detail, and am not afraid of math. I don't mind if the book is broader, as long as it includes a reasonably in depth look at these GSEs and their role.  This seems to be a pretty basic piece of knowledge for many financial professionals, so I assume there must be at least one standard textbook on this that I just haven't been able to find.  EDIT: I'm looking for something post 2008 of course. "It's helpful to remember that Charles Ponzi started with a legitimate arbitrage (international postal remittances).  Once purveyors of arbitrage reach a certain scale, there's a natural tendency to become lazy and just forgo the arbitrage and just use new investor money to pay off previous investors.  Banks wouldn't be any different if it weren't for central banks and government participation.  Indeed, the primary reason that the FedResInk came into existence is **because** of ponzi-like bank failures (bankers call them ""a run on the bank"").  Neoclassical economics is about using the synthesis of state sovereignty and central bank monetary theory to keep the system they've developed intact.  ...and, as fun as it might be to sit back and calculate just how much debt can be created from a life-time of labor proceeds (a couple million for the average person-- completely hypothetical back of the envelope inflation excluded, 4.5x10^14, which is still in middle of the trillions), it would be wise to keep in mind that the last banking crisis, while fundamentally caused by the inability to collect future labor proceeds, was precipitated, not by individuals, but by repurchase agreements propping up extremely leveraged positions made by and between massive investment banks.  So, the thing to remember is that fractional reserve debt issuance banking is like a 10 to 1 transistor that has a fundamental tolerance requirement on the source signal, but that when the source signal fades, it can draw from the surplus signal created by the 10 to 1 amplification (up to a certain point and then the transistor goes up in a puff of smoke)." "There are two ways that mortgages are sold: The loan is collateralized and sold to investors. This allows the bank to free up money for more loans. Of course sometime the loan may be treated like in the game of hot potato nobody want s to be holding a shaky loan when it goes into default. The second way that a loan is sold is through the servicing of the loan. This is the company or bank that collects your monthly payments, and handles the disbursement of escrow funds. Some banks lenders never sell servicing, others never do the servicing themselves. Once the servicing is sold the first time there is no telling how many times it will be sold.  The servicing of the loan is separate from the collateralization of the loan. When you applied for the loan you should have been given a Servicing Disclosure Statement Servicing Disclosure Statement. RESPA requires the lender or mortgage   broker to tell you in writing, when you apply for a loan or within the   next three business days, whether it expects that someone else will be   servicing your loan (collecting your payments). The language is set by the US government: [We may assign, sell, or transfer the servicing of your loan while the   loan is outstanding.] [or] [We do not service mortgage loans of the   type for which you applied. We intend to assign, sell, or transfer the   servicing of your mortgage loan before the first payment is due.] [or]   [The loan for which you have applied will be serviced at this   financial institution and we do not intend to sell, transfer, or   assign the servicing of the loan.] [INSTRUCTIONS TO PREPARER: Insert   the date and select the appropriate language under ""Servicing Transfer   Information."" The model format may be annotated with further   information that clarifies or enhances the model language.]" A security is a class of financial instrument you can trade on the market.  A share of stock is a kind of security, for example, as is a bond. In the case of your mortgage, what happens: You take out a loan for $180k.  The loan has two components. a.  The payment stream (meaning the principal and the interest) from the loan b.  The servicing of the loan, meaning the company who is responsible for accepting payments, giving the resulting income to whomever owns it. Many originating banks, such as my initial lender, do neither of these things - they sell the payment stream to a large bank or consortium (often Fannie Mae) and they also sell the servicing of the loan to another company. The payment stream is the primary value here (the servicing is worth essentially a tip off the top).  The originating bank lends $180k of their own money.  Then they have something that is worth some amount - say $450k total value, $15k per year for 30 years - and they sell it for however much they can get for it.  The actual value of $15k/year for 30 years is somewhere in between - less than $450k more than $180k - since there is risk involved, and the present value is far less.  The originating bank has the benefit of selling that they can then originate more mortgages (and make money off the fees) plus they can reduce their risk exposure. Then a security is created by the bigger bank, where they take a bunch of mortgages of different risk levels and group them together to make something with a very predictable risk quotient.  Very similar to insurance, really, except the other way around.  One mortage will either default or not at some % chance, but it's a one off thing - any good statistician will tell you that you don't do statistics on n=1.  One hundred mortgages, each with some risk level, will very consistently return a particular amount, within a certain error, and thus you have something that people are willing to pay money on the market for. For us it's good. Long-only equity investing is mostly reading, thinking and modeling. Then there's the exciting 1% of communicating your work. Our office doesn't feel too DM like though. Gorgeous wood walls, plush rugs, artwork amazing NYC skyline view etc. We joke that you would think it was a law firm if not for the multiple monitors.