Are you interested in buying a home, but you need a loan that exceeds the typical conforming limits or are unable to meet the qualifications for a conforming loan? If you find yourself in this situation, you may want to consider a portfolio loan. Portfolio loans offer an option for people to purchase a home who may not typically get approved for a regular mortgage. If you are looking to purchase a home in the areas of Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, our loan specialists at Foundation Mortgage can help you understand the portfolio loan process and determine if it is a suitable option for you.
Portfolio Loan Basics
Normally in the mortgage process, your lender does not keep your debt, but instead sells it to a third party such as Fannie Mae or Freddie Mac in order to create money to lend to other borrowers. In order to be sold off, these mortgages must meet certain guidelines that are set by the third party buyers, however, in certain circumstances, a mortgage will not align with these set guidelines. These loans are known as portfolio loans, and since the debt is not sold off, it becomes part of the lender’s “portfolio”. Generally, portfolio loans are offered by smaller banks or credit unions, rather than larger corporate entities.
Portfolio loans are intended for borrowers that would not typically be eligible to qualify for a traditional mortgage. Most borrowers who obtain a portfolio loan have a poor credit score, have had a recent foreclosure or bankruptcy, or are self-employed. Self-employed clients often seek a portfolio loan because their tax returns may not fully represent their worth, and since portfolio loans don’t have the same requirements as traditional mortgages, a lender may require bank statements to verify income rather than tax documents. Other common reasons people seek portfolio loans are if a borrower is looking to take out a second mortgage, fix and flip a home, or if the borrower needs to take out a loan amount that exceeds the conforming loan limits.
The Benefits Of a Portfolio Loan
Although they are not the right type of loan for every borrower, there are some benefits to obtaining a portfolio loan. One main benefit of this type of loan is that the qualifications are less strict than with traditional loans since the lender sets their own rules and does not have to adhere to conforming loan standards. This allows people to receive home financing who would not normally be eligible for a mortgage. With a portfolio loan, you will be working with the same lender throughout the duration of the loan, so you will more than likely foster a closer relationship with the lender and they may be more understanding if you run into any issues. Additionally, portfolio loans usually do not require the buyer to buy private mortgage insurance, which can save them a great deal of money.
Assistance With Portfolio Loans
Every potential home buyer has different circumstances and specific financing needs. Contact Foundation Mortgage today if you are curious about your loan options in Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee. We can help you determine if a portfolio loan is the solution for you.