Portfolio loan new investor, pull cash out

[Charles D.]

What sort of qualifications does a local bank typically look for when generating a portfolio loan? Here is a hypothetical scenario for the borrower: Assuming the loan is against a 2-3 family rental bought with cash. New investor, first investment property Owned by an LLC (single member) Want to pull cash out for another deal. The single member would qualify for a conventional loan (good credit, low debt to income etc.)

[James Zettelmeyer]

Correct on everything above, ill just break it down a little further.  At the top of the food chain is your Fannie/Freddie product which basically has the highest standards, but the lowest costs and rates.  Next step down would be your local banks portfolio products which are usually modelled after Fannie/Freddie, but are willing to make some concessions if you are strong enough.  Credit and cash tend to help a lot, especially with local banks because if they can take cash deposit accounts away from their competitors, they will tend to try and be more flexible.  This will be a slightly more expensive option with slightly higher rates but a potentially very good one if you can build a good relationship.  Then you have the whole sale portfolio market where they will do no doc, no asset, no income verification etc., but comes at an even higher cost.  Most of those guys charge 2-3 points and you'll land anywhere from 6-10% with both ARMS and Fixed.  Lastly, you have the Private/Hard Money lenders which are generally short term financing, 6-24 months, interest only.  You'll pay anywhere from 10-18 percent and roughly 2-5 points or so.  Any one of those 4 options could either the best decision you ever made or the worst, just depends on you and your specific situation.  Oddly enough, the Fannie/Freddie option is the least "relationship" based as everyone of your files has to be underwritten to the same rules with no exceptions given due to good performance on prior deals.  The other three options allow you the ability to develop a relationship and build on that....