If you’ve had some past financial problems, you might feel that qualifying for a mortgage isn’t in your foreseeable future. However, even if you’ve had a foreclosure, bankruptcy, tax lien, or similar situation, you do have options available. One such option is a portfolio loan.
What is a portfolio loan?
Often, mortgage lenders sell their home loans to other lenders, but some credit unions and smaller regional banks like NASB offer portfolio loans. Here’s what you should know about portfolio loans to determine if they’re right for you.
Who should consider a portfolio loan?
Conventional loans generally require a good credit score and no recent foreclosure or bankruptcy in your financial history. Portfolio loan lenders will dig deeper to find out about what caused your economic issues and what you’ve done to recover from it. This allows borrowers with blemishes on their financial history to have a chance at owning a home. Other situations that make a portfolio loan a good option include:
- Self-employed borrowers.
- Foreign nationals.
- Borrowers with high income, low credit.
- Borrowers without documented income but high net worth.
- Borrowers who have had a bankruptcy, short sale, or foreclosure.
What types of portfolio loans are available?
The lender determines the rates, terms, and qualifications of each loan product because these loans do not follow conventional loan guidelines. Shop around for lenders to find the most favorable terms for your situation. There are three types of portfolio loans that a lender may offer:
Balance sheet loan
- This loan is generally best for those who have credit scores, debt-to-income ratios, or properties that don’t meet the guidelines of a conventional loan. These loans offer fixed-rate options and generally require a borrower to make a small down payment with mortgage insurance approval, or a larger one without mortgage insurance.
- These loans are similar to balance sheet loans with the added feature of being able to exceed the Fannie Mae loan limits. The qualifications for a jumbo loan are stricter because the lender wants to make sure the amount can be paid back. Investors who wish to purchase property above the loan limit should consider a jumbo loan.
- up to 95% of value can be approved with mortgage insurance. These funds can be used to pay off more expensive credit card debt, or to invest in home improvements.
To find out if a portfolio loan is right for you, contact the experts at NASB at 855-465-0753.