Portfolio Loans

8 Replies

Portfolio Loans.....I am looking to learn more about them and some real life scenarios people have used.

1.) How does it work compared to a traditional 20% down loan that I have used on my other two properties.

2.) Are smaller local banks best people to approach about these?

3.) Any other information to help me understand everything I can about these type of loans would be great.

Thanks BP friends!

@Landon Dean  As the name suggests, Portfolio Loans are loans that a lender holds onto in their portfolio. Most loans done by any lender (big or small) are bundled and sold of to investors in the market.

The size of the portfolio loan would determine the type of lender you would want to look for. Portfolio loans typical need more down and carry a higher interest rate.

Why are you looking at a portfolio loan when you only have 2 loans. Fannie Mae allows an individual to have up to 10 loans. The underwriting get harder, but it can be done. You should try to us the conventional loans as long as you can.

Upen Patel, Mortgage Banker

National Lender, Federal NMLS# 1374243

Upen Patel, Lender in (#National Lender NMLS 1374243)
(571) 331-5161

I agree with Upen but I believe what you are asking about is actually what is called a credit facility. This is where you are borrowing against "your" total portfolio. Another term is a line of credit. In either case the concept is that you have significant net worth and income for the overall loan level. The term portfolio loan is most commonly used in the banking industry as described by Upen as a loan held by the bank and not sold. The possible advantage is that the bank might be willing to offer terms that do not comply with traditional secondary mortgage markets (ie sellable) and hence you could get a better deal. Unfortunately, in today highly regulated banking environment, such loans are only available to AAA+++ clients (the kind that do not need the money).

Hope that helps. 

Originally posted by @Nicolas Paez:

I agree with Upen but I believe what you are asking about is actually what is called a credit facility. This is where you are borrowing against "your" total portfolio. Another term is a line of credit. In either case the concept is that you have significant net worth and income for the overall loan level. The term portfolio loan is most commonly used in the banking industry as described by Upen as a loan held by the bank and not sold. The possible advantage is that the bank might be willing to offer terms that do not comply with traditional secondary mortgage markets (ie sellable) and hence you could get a better deal. Unfortunately, in today highly regulated banking environment, such loans are only available to AAA+++ clients (the kind that do not need the money).

Hope that helps. 

I would respectfully disagree. Portfolio loans are generally easier to get than what people consider traditional loans with respect to investment properties.

Portfolio lenders typically require personal guarantees, which gives them added collateral to offset risk. The loans are underwritten with almost all of the risk weighting given to the collateral being pledged. If the collateral is of sufficient value and/or throws off sufficient income, the loan is much easier to get approved than a traditional secondary market loan based on the borrower's DTI/Credit scores.

Originally posted by @Michael Worley :
Originally posted by @Nicolas Paez:

I agree with Upen but I believe what you are asking about is actually what is called a credit facility. This is where you are borrowing against "your" total portfolio. Another term is a line of credit. In either case the concept is that you have significant net worth and income for the overall loan level. The term portfolio loan is most commonly used in the banking industry as described by Upen as a loan held by the bank and not sold. The possible advantage is that the bank might be willing to offer terms that do not comply with traditional secondary mortgage markets (ie sellable) and hence you could get a better deal. Unfortunately, in today highly regulated banking environment, such loans are only available to AAA+++ clients (the kind that do not need the money).

Hope that helps. 

I would respectfully disagree. Portfolio loans are generally easier to get than what people consider traditional loans with respect to investment properties.

Portfolio lenders typically require personal guarantees, which gives them added collateral to offset risk. The loans are underwritten with almost all of the risk weighting given to the collateral being pledged. If the collateral is of sufficient value and/or throws off sufficient income, the loan is much easier to get approved than a traditional secondary market loan based on the borrower's DTI/Credit scores.

It depends on what kind of portfolio loans you're talking about because there are lots of types of "portfolio," loans. People are lead to believe on BP that "portfolio," financing is the unicorn of financing that will save investors after they hit that 10+ properties mark. I have portfolio financing options but they are pretty hard to actually get approved (high fico, DTI, and asset requirements, property restrictions, etc) however if we're talking about portfolio financing from a local, commercial, or business bank then yes its mucher easier because these products are not judged on the merits that are typically used on standard residential criteria but rather commercial lending criteria. New terms pop up such as debt coverage ratio, global debt coverage, net worth, pfs or personal financial statement, stabilized, economic occupancy, etc.

If you come in to one of these local commercial banks with a well prepared personal financial statement, high networth, and good global debt coverage then getting this kind of portfolio loan will be so easy it will make you think twice about conventional  residential loans for investment.

Albert Bui, Lender in CA (#345453), WA (#345453), TX (#345453), and TN (#345453)
949-514-5106

Portfolio loans very depending on the bank doing them, since they are in house the banks can more or less make their own rules. 

So you need to talk to a number of different banks to see what they offer, some are ultra conservative others are more investor orientated.  Right now banks are having trouble making money so if they find a good investor they will more or less shove money down your throat.

Typically they are more expensive than traditional residential financing and are in my experience very easy to get once you have a track record. Unlike traditional financing the underwriting is very flexible so closing one is quite simple. 

Also right now they are hot in the rental space so banks are willing to negotiate on the terms a bit. I have gotten rate adjustments pushed back, construction periods increased, and pre payment penalties removed. All by asking. So don't be afraid to negotiate a bit especially once you have a track record. 



I concur with @Chris Field , portfolio loans can be easier to get, they are just harder to find. Once you find someone willing to do them, though, investors tend to have a better experience with qualifying.

Thank you all for the replies, this just keeps me learning......I can't thank you all enough for your help and guidance.

I'm very interested in learning about this also. What does a portfolio involve? 

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