A portfolio loan is a mortgage loan that a lender retains and does not sell on the secondary market. Since it is never sold to another investor, a lender has more control over the eligibility criteria it deems acceptable. This makes a portfolio loan a good option to consider if you do not qualify for a traditional type of loan or are looking for more flexible qualification requirements.
While portfolio loans can be easier to get as a borrower, lenders consider them to be a higher risk because of the expanded eligibility criteria. As a result, portfolio loans tend to carry higher rates and fees.
If you’re looking for a portfolio loan, we recommend considering CoreVest, which has no minimum credit score requirement and can lend on a wide range of property types. You can visit the CoreVest website to apply online, contact the company using its 800 number, or use its chatbot to answer your questions.
Portfolio Loan Types, Rates, Terms & Requirements
Portfolio loan rates, terms, and qualification requirements will vary from lender to lender. These items can also be determined by your intended use of the loan proceeds and the amount of your loan. For example, portfolio loans can be used to purchase a single property or multiple properties at the same time.
Here are some common types of portfolio loans along with a summary of typical rates, terms, and requirements you may come across. Remember, though, that specific figures can vary from lender to lender.
Typical Rates & Terms | |
Loan Amount | $726,200 |
Starting Interest Rate | 7.5% |
Repayment Term | Up to 30 years |
Typical Qualifications | |
Loan-to-Value (LTV) | 95% |
Credit Score | 550 to 620-plus |
Debt-to-Income (DTI) Ratio | 55% |
Cash Reserve Requirements | 0 to 6 months |
Purchase Portfolio Loan
A portfolio loan can be used to purchase a property that may not otherwise qualify due to repairs that are needed. By comparison, traditional lenders typically require a property to be in good condition, free of any health or safety hazards. This is part of a lender’s risk management, to ensure that in the event of a default, it can resell the property more easily to recoup at least some of its losses. Properties in poor condition tend to be more difficult to market and sell, making it more challenging for the lender to break even.
If you want to purchase a property that does not qualify for traditional financing, you can consider a portfolio loan to acquire the property and then subsequently complete the necessary repairs. Rates and fees tend to be higher to account for the increased risk of loss to the lender. Depending on your overall credit and finances, you may also be required to place a larger down payment or provide proof of cash reserves.
LendingOne is a company we recommend for borrowers looking to rehab a property and then hold it long term for rental income. It also made our list of the best investment property loans and offers competitive rates and the ability to transition the initial loan into a longer-term loan once the property repairs are done.
Cash-out Refinance Portfolio Loan
Typical Rates & Terms | |
Loan Amount | $726,200 |
Starting Interest Rate | 7.75% |
Repayment Term | Up to 30 years |
Typical Qualifications | |
LTV | 80% |
Credit Score | 620-plus |
DTI Ratio | 50% |
Cash Reserve Requirements | 6 to 12 months |
In a cash-out refinance, you convert your property’s equity into funds you can use for other purposes. Cash-out refinances work by giving you a new loan amount that is larger than what is needed to pay off the existing mortgage loan on the property. Once the payoff balance and loan fees have been accounted for, the remaining amount can then be deposited into the bank account of your choosing.
To do a cash-out refinance, you’ll need to have a sufficient amount of equity in the property. Lenders will often require an appraisal of your home to determine its current value. The amount of existing mortgage loans on the property and the lender’s maximum LTV ratio will then determine your maximum loan amount.
Lima One Capital is a good option if you’re in the market for a cash-out refinance. It can issue funding for different types of properties and scenarios, including multifamily, rental properties, construction, and fix-and-flip homes.
Jumbo Portfolio Loan
Typical Rates & Terms | |
Loan Amount | $5 million and up |
Starting Interest Rate | 7.625% |
Repayment Term | Up to 30 years |
Typical Qualifications | |
LTV | 80% |
Credit Score | 620 to 680-plus |
DTI Ratio | 45% |
Cash Reserve Requirements | 12 to 24 months |
Jumbo portfolio loans are typically larger loan amounts that exceed the conforming loan limits set by the Federal Housing Finance Agency (FHFA). These limits can vary each year and are dependent on things like your property location and property type. For 2023, most loan amounts that exceed $726,200 will be considered a jumbo loan. However, that amount can be as high as $2,095,200, depending on the specific property characteristics.
A portfolio loan does not have to be categorized exclusively as a jumbo loan. In other words, a jumbo loan can also be a purchase, cash-out refinance, or blanket mortgage, depending on what you intend on doing with the loan proceeds.
You can check out North American Savings Bank (NASB) if you’re interested in a jumbo loan. NASB provides low down payment options for purchases, refinances, and can also work with borrowers who have blemishes on their credit report.
Visit North American Savings Bank
Blanket Mortgage Portfolio Loan
Typical Rates & Terms | |
Loan Amount | $50 million+ |
Starting Interest Rate | 9% |
Repayment Term | Up to 30 years |
Typical Qualifications | |
LTV | 75% and under |
Credit Score | 620 to 650-plus |
DTI Ratio | 45% |
Cash Reserve Requirements | 6 to 12 months |
With a blanket mortgage, you can purchase multiple properties or parcels of land secured by a single loan. This can be done to streamline the financing process and save time from having to finance each individual home separately.
Blanket mortgages can also be used to simplify loan payments, as a borrower would only need to make one payment to cover multiple financed properties. Blanket mortgages are often structured to allow the release of the mortgage lien against individual properties. When this occurs, they can vary depending on the terms of the loan agreement, but lien releases are typically triggered when the property is sold or the loan is paid.
This flexibility makes blanket mortgages a popular choice for investors looking to purchase a subdivision of homes, as it allows them to sell individual homes without needing to pay off the entire blanket mortgage loan amount. You can learn more in our guide about blanket mortgages.
If you’re considering this type of loan, you can head over to Kiavi, which offers cash-out refinance and rate-and-term refinance options for investors who have 5+ properties. Interest-only payment options are also available if you want to have lower monthly payments.
Who Should Consider a Portfolio Loan?
You should consider getting a portfolio loan if you’ve had trouble getting approved for traditional methods of financing. Lenders offering portfolio loans can be more flexible when it comes to not only setting the initial qualification requirements but also for making credit policy exceptions. Here are some scenarios in which a portfolio loan may be a good alternative:
- You have a low credit score or other credit issues: If your credit score is not high enough for other lenders, a portfolio lender may consider you for financing if you have other compensating factors such as strong revenue or a large down payment. This can also apply if your credit score is sufficient but you have been disqualified from other lenders due to negative items on your credit report, such as bankruptcies or outstanding collection accounts.
- You have income from irregular sources: Traditional lenders typically like to see a stable source of income that can be easily documented. If your income is not easily tracked or is otherwise unstable, a portfolio lender may have more flexibility to consider alternative methods of income verification.
- You don’t have much money for a down payment: Depending on the type of loan you’re trying to get, traditional lenders may require a large down payment as a condition of getting a loan. Portfolio lenders, on the other hand, can allow for lower down payment amounts, especially if you have strong credit and finances.
- The property is in need of repairs: Many lenders won’t lend on a property that needs repairs because it represents a greater risk in the event of a default. Properties in poor condition are more difficult to sell and will likely sell at a lower price. This makes it more difficult for a lender to recoup its losses even if it takes possession of the property. Portfolio lenders, however, can consider other strengths of your application to determine if it’s an acceptable risk.
- You need a large loan amount: Conforming loan limits typically have a maximum loan amount of $726,200. Portfolio lenders can offer financing amounts that exceed the loan limits that most conventional lenders offer even on their jumbo loan programs.
Portfolio Loan Pros & Cons
| Pros | Cons |
|---|---|
| More flexible qualification requirements for things like credit, income, and assets | Interest rates and closing costs tend to be higher |
| Larger loan amounts available | Fewer consumer protections against predatory lending practices |
| Loan terms can be customized | Can be more difficult to find compared to traditional financing options |
| Properties needing repair are more likely to be eligible for financing | |
Where To Get a Portfolio Loan
Portfolio loans are available from banks, loan brokers, online lenders, and even some credit unions. If you’re unsure where to start, we recommend checking out our list of the best portfolio lenders as a starting point. There, we also list some alternative financing options you can consider.
We also recommend reading our tips on how to get a small business loan. Although portfolio loans can be easier to get, our guide contains tips on how you can further streamline the process to get approved more quickly and at the best possible rate.
Frequently Asked Questions (FAQs)
Portfolio loans tend to be easier to get compared to traditional mortgage loans. Portfolio loans offer more flexibility when it comes to common qualifications requirements like credit score, down payment, and income. Additional flexibility can also apply to the property itself, as homes needing repairs are often eligible for financing through a portfolio lender.
Portfolio loan rates do tend to be higher when compared with traditional mortgages. This is because these loans represent a greater level of risk to a lender, as portfolio loans often allow financing with lower credit scores, down payment amounts, and properties in need of repairs. In many cases, portfolio loans are used for commercial purposes, and you can check out our guide on commercial real estate (CRE) loan rates to see what impacts the rate you get.
Portfolio loans can take between 10 and 45 days to close. The exact timeline will depend on how you intend on using the loan proceeds, your qualifications, and the lender you choose.
Bottom Line
Portfolio loans are not sold on the secondary market, and because of this, lenders have more control over the types of borrowers they lend to. Portfolio loans tend to have more flexible qualification requirements, but this comes at the cost of higher rates and fees in most cases. If you’re unable to get traditional types of financing, a portfolio loan can be a good option.
