When a bank decides not to sell a loan on the market, they are keeping it in their portfolio. This is known as a portfolio loan. Banks choose to do this so that they can profit from all the interest as payments are applied. Portfolio loans may also give the company more control over the terms of their loan program. This may be helpful if you cannot qualify for a more conventional source of financing. Read on to learn more about why you want to take advantage of this program. Contact Stonebriar Mortgage for your home purchase needs in the Dallas, Texas or California market.
The Portfolio Loan Application
Check with the bank who provides the loan for their specific application process. Many banks use automated underwriting software. If you lack the traditional documents to meet the automated standards, then a manual underwriting process may be best. Show your worth as a borrower through business assets or investments. Many small banks operate portfolio loan programs to attract an entrepreneurial or investment-savvy borrower into their business. For this reason, they may offer you better rates and loan terms, so that you stay with their company and open other accounts.
Benefits of Using a Portfolio Loan
Obviously, this loan could benefit you if you cannot qualify for a traditional loan program. Many people also appreciate the more personalized customer service they get from working with a smaller bank or credit union. In a larger bank, you may deal with an array of people over the life of the loan, and struggle to build trust.
Many investors are attracted to portfolio loans for fix and flip properties. The manual underwriting standards may adapt to their unique needs. For example, if you have a high debt-to-income ratio or an unusual credit history, the lender can still work with you.
Risks of Using a Portfolio Loan
Some portfolio loans will carry additional risk, especially if you already carry a lot of debt. The manual underwriting process could subject you to increased interest rates and fees. In addition, a higher down payment may be asked. You can always explore refinancing the loan later if you are not getting your preferred terms. Read the bank agreements closely, since many customize policies. Note if there are any sections where you are being asked to waive certain consumer rights. You should also note any penalties for taking actions such as paying off the loan early, selling at a certain point, refinancing, or more.
Whatever your decision, the friendly staff at Stonebriar Mortgage are here to help. We can discuss your interests and guide you in the portfolio loan process. We are here to support Dallas, Texas and California homebuyers.