Portfolio loan in a nutshell

For the uninitiated, a portfolio loan is a mortgage type that a lender originates and retains, meaning that your lender won’t resell it to a secondary market, unlike regular loans. While the government backs non-conventional mortgages, conventional ones are typically sold to third parties, such as Fannie Mae and Freddie Mac, but this won’t happen with a portfolio loan.

For this reason, a portfolio loan has less stringent qualifications and requirements for its approval, which is usually offered by smaller community banks and credit unions.

How a portfolio loan works

As mentioned, a portfolio loan differs from non-convention loans and government-insured mortgages. Because of its less strict qualifications and requirements, you can apply for this and easily get approved. Here are some of its common features:

1. No conforming loan limits
2. Flexible down payment requirement
3. Does not require a private mortgage insurance (PMI)

Keep in mind that this loan type isn’t for everyone and isn’t normally advertised. If you want to take advantage of this, you have to shop around and ask various banks or local lenders if they offer this option. If they do, then you can submit your application and wait for the approval!

Types of homebuyers needing a portfolio loan

If you’re wondering who can apply for a portfolio loan, below are some of them:

1. Self-employed borrowers
2. Individuals with low credit scores
3. Individuals who have gone through a bankruptcy, short sale, or foreclosure
4. Individuals facing judgments, liens, or tax issues
5. Investors who have maxed out their traditional financing options
6. Foreign nationals

If you are one of those mentioned above, rest assured; you are still given a chance to get a mortgage through this portfolio loan.

Advantages and disadvantages of a portfolio loan

Let’s now take a look at the pros and cons of taking out a portfolio loan:

Pros

1. Less stringent qualifications: If you’re having a hard time getting approved for a mortgage, then this option can be your best bet.
2. Close lender and buyer relationships: If you want to take advantage of this loan type, you must have a good relationship with your local bank so that they can grant your request. While you’re at it, you can take advantage of some flexibility brought by your close relationship with your lender.

Cons

1. High-interest rate: While loan eligibility or qualification may be easy, your lender may recoup by imposing a higher interest rate compared to non-conventional loans.

HI Velocity Mortgage: Your O’ahu Mortgage Lender

At this point, you now know what a portfolio loan entails and how it works. Be sure to consider all the valuable information discussed above and weigh in the pros and cons. With all these in mind, you’ll be able to make the right decision as you aspire to own your dream home finally!

Are you looking to take advantage of a portfolio loan? You’ve come to the right place! We’re a mortgage broker in Ewa Beach, Hawaii, committed to helping clients through their home buying process. If you need help and assistance from a loan officer, call us today at (808) 727-1055 to see how we can help!