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Portfolio loans

What to Know About the Portfolio Loan Option?

Struggling to get approved for a traditional mortgage loan? Then a portfolio loan might be the the option to help you pave your path to home ownership. Understanding the basics of a portfolio loan can help you become a homeowner or extend your real estate investment holdings. A Portfolio Loan: What Is It? A portfolio loan is a kind of mortgage that a lender would originate and keep in their “portfolio” instead of selling it to a secondary market like a traditional mortgage loan. Due to this process, the lender is able to set more flexible terms for the mortgage, which are frequently to the borrower’s advantage. This allows prospective homeowners who are having trouble being approved for a traditional mortgage accomplish their dreams of homeownership. In the majority of conventional mortgage loan scenarios, banks and credit unions use a set of governmental guidelines to underwrite and create loans. These rules place minimum down payment requirements, maximum loan amounts, particular debt-to-income ratios, and other constraints on potential borrowers. However, the criteria for awarding portfolio loans can differ significantly, which allows the lender to find the loan solution that is most ideal for their client. Portfolio Loans Pros No matter which financial lender originates and underwrites a portfolio loan, the product will always offer certain advantages like: The Function of Portfolio Loans Portfolio loans typically have higher loan interest rates and origination fees in exchange for having fewer strict loan approval standards. They might also have restrictions on flexibility and prepayment fees. Lenders frequently seek a higher interest rate on a portfolio loan product since they are free to use any criteria they choose when deciding whether to underwrite the loan. If you’re having difficulties acquiring a standard loan because of a poor credit score, a troubled credit history, or the fact that you’re self-employed, a portfolio loan might be the best option for you. It might also be a possibility if your debt-to-income (DTI) ratio is high, you need a loan for a home in less-than-ideal shape, or the purchase price exceeds the loan’s maximum amount. Homebuyers who use a portfolio loan should anticipate a quicker approval process, less stringent upfront conditions, and better customer support from their portfolio lender, who will handle the loan’s direct servicing. Additionally, they should expect higher origination and interest rates, as well as less flexibility with their repayment timeline. You might want to discuss if a portfolio loan makes sense for you before submitting an application with a mortgage broker, an accounting professional, or a financial expert. The Bottom Line Portfolio loans might be a useful instrument for real estate financing because they aren’t meant for resale and don’t have to meet as strict eligibility rules as traditional mortgages. In some cases, borrowers may find them to be more alluring than conventional loan options. However, compared to conventional mortgages, portfolio loans frequently have higher interest rates and fees.  Keely Notes: I have edited this article. Please go back and review the flow of the […]

Portfolio Loans

Portfolio Loans | SouthStar Bank What is a portfolio loan? A SouthStar Bank portfolio loan is originated and funded right here at our institution, and never moves into the secondary mortgage market. It’s called a “portfolio loan” because it’s always going to stay in our portfolio. That means we can rely on our relationship with the customer to determine loan eligibility even if they don’t meet the typical mortgage profile. For example, meet Annie. Annie is a freelance marketing consultant with variable income.  Her credit score has taken a few hits but we’ve known Annie for years. She’s been a customer in good standing and a part of our community for a long time. Her business is picking up, and she’s starting to get back on her feet. Purchasing a home could improve her stability, her credit, and her children’s lives. She may even want to purchase a four-plex, so she can start earning some rental income on the other three units.  Annie comes to SouthStar Bank and meets with one of our loan officers to discuss the Star Advantage Loan. We look at her plans, her property, and total financial picture and make a decision about whether she’ll be a good risk. If we agree the loan makes good business sense, we move forward, even though she would not have been eligible for a loan through Fannie Mae and Freddie Mac. Are portfolio loans a good idea? A portfolio loan generally isn’t riskier for the consumer than any other kind of mortgage. It is riskier for the banker, which means it can come with higher interest rates and fees. Whether they are a good idea for you depends on your unique situation and goals. Would you be able to qualify for a conventional mortgage with just a little more work and time? Do you have aspirations towards becoming a landlord or real estate investor? Are you trying to purchase a non-traditional property or unique property? Of course you should carefully consider the total picture before you make your final decision. Our loan officers are happy to discuss the risks and benefits of a portfolio loan in your specific case. How do you qualify for a portfolio loan?  Applying for a portfolio loan isn’t just about forms and numbers. It’s about your story. Be prepared to sit down and discuss yours. Tell us what your assets are, what you hope to accomplish, what’s behind, and what’s ahead. Be thorough and be transparent, even if you think parts of your situation might create an issue. We might be willing to work with you anyway, or we might be able to walk you through specific steps you can take to address areas of concern. What are some common uses for a portfolio loan?  Many of our customers have used portfolio loans to: Purchase a residence after a bankruptcy, short sale, foreclosure, or divorce. Purchase a residence while self-employed. Purchase a residence as a foreign national. Purchase a rental property or a fix-and-flip […]

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