What Are Portfolio Loans?

To most people, understanding loans can be intimidating, but it doesn’t have to be. Portfolio loans are simply a subset of loans that falls under a much broader loan umbrella. But what exactly is a portfolio loan, and what is the process of qualifying for one?

What are They?

A portfolio loan is a type of loan that is not sold to or guaranteed by Fannie Mae or Freddie Mac. Instead, these loans are held by the originating lender. They can be used to finance a variety of properties, including investment and commercial real estate. These loans can be an attractive financing option for borrowers who may not qualify for traditional bank financing.

How do These Loans Work?

Portfolio loans are originated by banks, credit unions, and other lenders that choose to hold the loan in their portfolio. The lender will service the loan and may sell the loan to another investor. They are a type of mortgage that is held by the lender, rather than being sold on the secondary market to companies such as Fannie Mae or Freddie Mac, the guidelines for these loans are set by the lender. As a result, they can be more flexible than conventional loans. Because they are not subject to the same regulations as other loans, they can be a good option for borrowers who might not otherwise qualify for a mortgage because the terms of the loan can be customized to meet the needs of the borrower and that the lender has more flexibility when it comes to underwriting.

The Benefits

These loans offer a number of advantages over traditional loans.

• They can be used to finance a wide variety of properties, including investment and commercial real estate.
• They can be an attractive financing option for borrowers who may not qualify for traditional bank financing.
• They can be more flexible than conventional loans, giving borrowers more options and potentially lower interest rates.

The Drawbacks

Borrowers should weigh the benefits and drawbacks before applying. There are a few potential drawbacks to portfolio loans, including:

• They may have higher interest rates than conventional loans.
• They may be more difficult to qualify for than conventional loans.
• Borrowers may have to provide more documentation to the lender when applying.

How to Qualify

First, you’ll need to have a strong track record as a real estate investor. Lenders will want to see that you have experience managing properties and that you have a good history of making timely rental payments. Secondly, you’ll need to have enough equity in your properties to secure the loan. This generally means having at least 25% equity in each property. Finally, you’ll need to have good credit and adequate income to make the monthly loan payments.

Ready to Get Started?

If you’re looking for a financing option that offers more flexibility than a traditional loan, Union Capital Mortgage can help. We offer portfolio loans for a variety of purposes, including investment and commercial real estate. To learn more about our portfolio loans, call us today or apply online and our experts will help you get the financing you need.