Portfolio Loans

A portfolio loan is a helpful tool for financing a home purchase if you’re having trouble securing a conventional mortgage loan or VA or FHA loan alternative. This loan is a type of mortgage that a lender issues and keeps within their range of investment holdings instead of selling on to another company. As the portfolio lender originates and keeps a portfolio loan in-house rather than reselling it on the secondary market, it allows the lender to set more flexible terms surrounding the mortgage, often in the borrower’s favor.

How Do Portfolio Loans Work / Who Do They Benefit

In exchange for less stringent loan approval requirements, portfolio loans generally come with higher loan interest rates and origination fees attached. They may also come with less flexibility and prepayment penalties attached. Because a lender may select whatever criteria they like when deciding to underwrite the loan, they’ll often seek a higher interest rate on a portfolio loan product.

A portfolio loan may be the right choice for you if you’re having trouble getting a traditional loan due to a low credit score, troubled credit history or you’re self-employed. It also may be an option if you have a high debt-to-income (DTI) ratio, need a loan on a property that’s in poorer condition or if the purchase price exceeds maximum loan limits.

What Are The Requirements And How To Qualify

Under most traditional mortgage loan scenarios, banks and credit unions underwrite and craft loans using a set of government standards. These standards require borrowers to:

·      Meet certain minimum credit requirements, typically above 700

·      Hold specific debt-to-income ratios and place minimums on down payment needs and maximum limits on loan sizes

·      Maximum debt-to-income ratio, generally 43%


·      More rapid approval process

·      Less demanding up-front requirements

·      Easier to qualify for than alternate loan types