Portfolio Loan: What Is It And How Does It Work?
Author:
Scott SteinbergFeb 14, 2024
•4-minute read
A portfolio loan is a helpful tool for financing a home purchase if you’re having trouble securing a conventional mortgage loan, a Department of Veterans Affairs (VA) loan or a Federal Housing Administration (FHA) loan.
Understanding how portfolio loans work can help you become a home buyer or grow your real estate investment holdings. Learn how portfolio lenders and their unique mortgage offerings can help you finance your future home purchase.
What Is A Portfolio Loan?
A portfolio loan is a type of mortgage a lender issues and maintains as part of their investment holdings. Unlike traditional mortgages sold to investors on the secondary mortgage market, portfolio lenders originate and keep portfolio loans in-house. Because the loans are held and serviced by the lenders, it gives them more flexibility when setting mortgage terms – often in the borrower’s favor.
Portfolio lenders can’t sell their loans on the secondary market because they don’t use the same eligibility criteria traditional lenders use to qualify borrowers for a conventional, FHA or VA loan. Because portfolio loans aren’t restricted to traditional lending guidelines, prospective home buyers with nontraditional incomes or credit histories can get the money they need to achieve their dream of homeownership.