If you’re looking for a great real estate investing option that’s left of standard conventional loans, then portfolio loans could be exactly what you’re looking for.
Portfolio lenders are usually at local, community and smaller independent banks – not the big-name national banks with tv commercials and such.
Many banks have very strict rules on providing conventional loans to investors because they originate loans and then package all their loans up and resell them to Fannie Mae and Freddie Mac - the nicknames given to the two government-sponsored enterprises called The Federal National Mortgage Association (FNMA) and The Federal Home Loan Mortgage Corporation (FHLMC).
Another way many banks provide conventional loans is buy these lending sources not actually using their own capital to fund the loan. Instead, they are acquiring or borrowing the funds from another party.
Many banks and lending institutions do these practices of packaging and selling their portfolios of loans in order to see a more immediate return on their investments.
It becomes difficult for investors to get conventional loans from banks due to the fact that when banks sell their portfolio of mortgages to Fannie Mae and Freddie Mac, the have strict guidelines of what they’ll buy – so they know what they’re buying from these banks.
That means that real estate investors, with their rather unconventional financing and investing strategies don’t meet the strict requirements, in most cases.
Good News About Portfolio Loans
But fret not!
That’s where portfolio lenders can help!
Portfolio loans offer more flexibility, potentially larger number of loans than conforming [balloon] loans, and even the possibility of getting loans on fixer-uppers and commercial properties.
It may be challenging to find them in your local community but if you’re trying to find a great funding source for all your future deals then you should definitely look to portfolio loans.
Portfolio lenders are not the easiest to find. They don’t generally call themselves ‘portfolio lenders’ so you have to do some digging.
Finding a Portfolio Lender
Brandon Turner, who wrote a good article on portfolio loans, said this about another investor who eventually found portfolio lender in his local community.
“Eventually, he found a great portfolio lender in his area, ironically based out of a Walmart! If you follow this strategy, just be sure to:
- Ask to speak with the loan officer because the teller will likely have no idea.
- Explain exactly what you mean since even the loan officer might not know the term “portfolio lender.”
Portfolio lenders often lend both conventionally AND through portfolio loans, so they can put you into whatever loan fits best. Also keep in mind, portfolio loans may be slightly higher in rate and shorter in term or have a balloon payment on the loan. (A balloon payment is a “due date” on a loan that is shorter than the amortized term. For example, you may have a thirty-year fixed-rate loan, but if there is a ten-year balloon, it means you must pay the entire balance of the loan off at year ten, most likely through a refinance.)”
Portfolio loans could be the perfect source of on-going investment funds you need to transform your business. Look into today.
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- Examine your current real estate investment portfolio/plans to see what’s working and what’s hurting. Discover where you’re making money and losing it.
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