What Are Portfolio Loans?
As a real estate investor, the odds are that you’re going to need to secure financing of some kind to close the deal on an investment property. Fortunately, there are many types of financing options available to investors. One popular type of financing among real estate investors in particular is portfolio loans.
Portfolio loans are considered non-conforming loans because they don’t meet the guidelines of Fannie Mae, Freddie Mac, or other government-sponsored enterprises. Lenders who offer these types of loans hold them in their portfolio instead of selling them on the secondary market.
Because portfolio loans are originated and retained by the lender, they provide a number of advantages when compared to other types of real estate investment loans.
The Advantages Of Portfolio Loans
Real estate investors who are researching their financing options will find that portfolio loans offer a number of benefits that other types of loans (especially traditional conforming loans) don’t offer. These benefits include the following:
- The ability to finance multiple properties under one loan: Traditional conforming loans only allow up to 10 financed properties under one loan, although it becomes increasingly difficult to finance additional properties once you’ve already financed four.
There is no limit on the number of properties you can finance with a portfolio loan, which makes this type of loan ideal for investors who are looking to grow a larger portfolio of rental properties.
- Time and money savings: Because portfolio loans are originated and retained by the lender, the process of securing the money you need is typically much faster. This is especially true once you’ve established a relationship with a portfolio lender and have built a level of trust with them based on past transactions.
In addition, because portfolio loans are not sold on the secondary market, there are no third-party fees or commissions that need to be paid.
- Not inhibited by conforming loan limitations: Portfolio loans are not bound by the same limitations as traditional conforming loans. This means that they can be customized to fit the needs of each individual borrower.
For example, a portfolio loan can be structured with a longer term than a traditional conforming loan, which can provide borrowers with more flexibility when it comes to repaying the loan.
- Flexible payment requirements: Portfolio loans typically have more flexible payment requirements than traditional conforming loans. For instance, lenders can set down any payment requirement they see fit.
This flexibility can be a major advantage for investors who are looking to free up cash flow in order to reinvest it in other areas of their business.
- Increase working capital: Portfolio loans can also be used to increase working capital for your real estate business. You could even take out a portfolio loan to help clear debt so that you can invest in more properties.
The Best Candidates For Portfolio Loans
As mentioned, there are some significant benefits to taking out a portfolio loan. That doesn’t necessarily mean that you’re the best candidate for a portfolio loan. With that in mind, the following are some of the best candidates for portfolio loans:
Investors With Bad Or Tarnished Credit Histories
If you have a bad or tarnished credit history, it can be difficult to qualify for traditional financing. However, portfolio lenders are typically more interested in your current assets and cash flow than they are in your credit history. This makes portfolio loans an ideal option for investors with bad or tarnished credit histories.
Borrowers Who Need To Refinance Or Consolidate Loans
If you need to refinance or consolidate loans, a portfolio loan can be a great option. This is because portfolio lenders are typically more willing to work with borrowers who have multiple loans. In addition, because portfolio loans are not bound by the same limitations as traditional conforming loans, they can be structured to fit the needs of each individual borrower.
Investors With High Income And Low Credit Score
If you have a high income but a low credit score, you might find it difficult to qualify for traditional financing even though you can afford the monthly payments. As long as you can prove that you can afford the monthly payments and that your investment opportunity is sound, a portfolio lender often won’t mind if your credit score isn’t perfect.
Requirements For Working With A Portfolio Lender in Maryland
Although portfolio lenders are more flexible than traditional lenders, there are still some requirements that you’ll need to meet in order to qualify for a portfolio loan in Maryland. The following are some of the most common requirements:
- Borrowers should be a landlord for at least three years: If you’re investing in a rental property, then most portfolio lenders will require you to have been a landlord for at least three years.
They are less likely to approve a portfolio loan for beginner investors with no rental property investment experience under their belts since this presents a greater risk to them. Basically, they want to make sure that you know what you’re doing.
- Borrowers should have no liabilities or liens on properties they own: In order to qualify for a portfolio loan, you’ll need to show that you don’t have any outstanding liabilities or liens on your current properties. This is because portfolio lenders will want to know that their investment is protected in the event that you default on the loan.
- All outstanding loans must be in good standing: In order for a portfolio lender to be confident in your ability to repay the loan, all of your outstanding loans must be in good standing. This means that you can’t have any late or skipped payments on your credit history within the past 12 months.
The Advantages Of Working With Portfolio Lenders
Real estate investors use portfolio loans not only because of the advantages the actual loans provide but also because of the benefits they’ll reap from working with a portfolio lender. The following are some of the most common advantages of working with a portfolio lender:
- You can consolidate your loans: If you own multiple properties, then a portfolio lender can consolidate your loans, which can save you a lot of money in interest payments over the life of the loan. Additionally, it can make your monthly payments more manageable since you’ll only have to make one payment instead of multiple payments.
- You can get a loan with fewer credit requirements: Because portfolio lenders are more flexible, you might be able to qualify for a loan with less-than-perfect credit.
While credit score requirements will differ from one portfolio lender to another, not meeting that requirement won’t necessarily disqualify you, especially if you can prove that you can afford the monthly payments.
- You can build a relationship with your lender: One of the best things about working with a portfolio lender is that you can build a positive relationship with them. This can be extremely beneficial because you’ll have a go-to person to help you with your financing needs in the future.
In addition, if you ever run into financial trouble, your lender may be more willing to work with you if they have a good relationship with you.
Why Work With Pine Financial Group
If you’re looking for a portfolio lender in Maryland, then Pine Financial Group is the perfect choice. We have years of experience working with real estate investors and have a proven track record of success.
The following are just a few reasons why real estate investors choose to work with us when it comes to financing their real estate investments:
We offer flexible loan terms that are tailored to meet your specific needs. The length of our loan terms are typically nine months, but we make exceptions when needed. Additionally, our interest rates are only 12 to 15 percent depending on the area you live in. We take a variety of factors into consideration when determining the terms of a loan and work closely with each client on a case-by-case basis.
Fast Closing Times
When it comes to real estate investing, securing financing in a timely fashion is critical. That’s why we offer fast closing times so that you don’t lose out on any potential investment opportunities.
Extensive Knowledge Of The Real Estate Market
Our team has extensive knowledge of the real estate market and can help you find the best financing options for your specific situation. Whether you’re new to real estate investing or you’re a seasoned investor, we can help you get the financing you need to invest in real estate throughout Maryland.