Are you considering taking out a loan? If so, one option that you may want to consider is a portfolio loan. A portfolio loan is not backed by any government-sponsored entity like Fannie Mae or Freddie Mac, and it is not sold on the secondary mortgage market. Instead, a portfolio loan is held by the lender who issued it and serviced by that same lender. Let’s dive into how portfolio loans work, their benefits, how to qualify for one, and more. 

How do Portfolio Loans Work? 

A portfolio loan is a type of mortgage that a lender holds in its own investment portfolio instead of selling it on the secondary mortgage market. It can be used as an alternative to traditional mortgages if your credit score isn’t high enough to qualify for other types of loans or if you need more flexible repayment terms or longer loan terms than those offered by conventional home loans. Generally speaking, lenders will charge higher interest rates for these types of loans because they have less protection if borrowers default on their payments. 

The Benefits of a Portfolio Loan Stacked coins is protected by red umbrella on wooden table white wall

One benefit of a portfolio loan is that some lenders are willing to make loans to borrowers with lower credit scores who would not normally qualify for other types of mortgages. Another benefit is that the lender might be more willing to offer more flexible repayment terms, such as allowing borrowers to pay interest only or offering extended repayment periods. This could make it easier for borrowers who are having difficulty making their payments due to financial hardship or unexpected circumstances. 

How to Qualify for a Portfolio Loan 

To determine whether you qualify for a portfolio loan, your lender will look at several factors including your credit history and score, income level and job stability, assets and liabilities (i.e., debt), and overall financial health. Your lender might also consider your relationship with them (if any) when evaluating your application for a portfolio loan. You should also be prepared to provide documents verifying your income and assets as well as proof of residence such as utility bills or bank statements showing where you live. 

The Different Types of Portfolio Loans Available 

There are several different types of portfolio loans available depending on your needs and goals. These include:

  • Standard fixed-rate mortgages
  • Adjustable-rate mortgages
  • Jumbo mortgages
  • Refinance options
  • Home equity loans
  • Private reverse mortgages
  • Construction/renovation loans
  • Bridge/short-term financing
  • Commercial real estate financing
  • Business lines of credit
  • Bridge lending
  • Asset-based lending
  • Non-conforming/subprime lending
  • Permanent working capital funding solutions
  • Term loans/debt consolidation products
  • Venture capital funding solutions
  • Equipment financing options

And many more. Understanding how portfolios work can help ensure that you get the best deal possible when selecting this type of mortgage product. Ultimately understanding all aspects – both good & bad – related to taking out a portfolio loan will help prevent any potential issues down the road so be sure to do your research before applying.

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Union Capital Mortgage is proud to offer portfolio loans tailored to fit your individual needs. Our portfolio loans come with competitively low interest rates and flexible repayment terms, so you can pay on your terms without worrying about defaulting on payments. We understand that everyone’s financial situation is different, and we’re dedicated to making sure you get the best deal possible. Contact us today and let our experienced loan officers help you get the portfolio loan that is right for you!