Today’s low mortgage interest rates make it more affordable to buy a home in Eugene, OR. Unfortunately, getting a home loan can be a challenge if your financial situation hasn’t always been superb. Let’s look at how you can use a portfolio loan to finance your new home purchase.
Portfolio Loan Basics
Don’t worry if you’re not sure about the basics of a portfolio loan. There’s no doubt that this type of mortgage is less well known than more conventional loans like VA and Freddie Mac.
Essentially, a portfolio loan is one where a financial institution directly funds the mortgage and keeps it within the bank’s portfolio throughout the life of the loan. This kind of loan differs from more common ones in that the latter ones sell on the secondary market. Loans destined for reselling must meet established guidelines that can make qualifying for them difficult.
An in-house loan can help you buy a house because it’s less strenuous to qualify for financing from an individual lender. Instead of struggling to meet strict lending rules, you’ll use your overall financial worthiness to convince the bank to give you a home loan.
Examples of When It Makes Sense
Generally, portfolio lending is available to borrowers who can readily afford to pay for a mortgage but can’t quite meet conforming mortgage rules. Examples of typical borrowers include self-employed people and those who can’t meet the debt-to-income ratio.
Pros and Cons of a Portfolio Mortgage Loan
A primary reason to consider an in-house loan is that it lets you buy a house. Still, as with every home loan, a portfolio loan has benefits and downsides. Knowing about them before you chat with a lender will help you decide if this mortgage financing fits your needs.
Pros
Happily, it’s possible to finance a mortgage without stressing that you won’t meet the super strict qualifications necessary for many regular loans. Indeed, as Bankrate notes, reasons that a portfolio mortgage loan makes financing findable include
- Flexible down payment amounts
- Ability to exceed typical loan-conforming limits
- Private mortgage insurance (PMI) is not required
You also won’t need to worry about recent money problems making it impossible to obtain a home loan. The lender will analyze your situation to decide if you are a strong borrower.
Downside
Since the bank doesn’t ask you to meet tight lending requirements, they won’t resell the loan. With conventional lending programs, the bank resells the loan and doesn’t hold the risk of a mortgage default over the long-term. Generally, the bank gives you lower interest rates and fees since the home loan carries less risk from its perspective.
When you take on a portfolio loan, the trade-off is that you’ll pay more for it than for other kinds of home financing options. Thus, in exchange for relaxed lending rules, the bank will charge you more in interest and loan fees.
Despite the potential downsides, there’s no doubt that portfolio mortgages can help you buy a terrific house in Lane County. Your mortgage broker can help you to decide if a portfolio loan suits your situation.
Now that you know about portfolio loans, it’s time to find out how to get one.
How to Get a Portfolio Loan
Financing your dream home isn’t always an easy path, and portfolio loans can fund the purchase if you qualify. The critical thing to remember is that banks don’t hand out a bundle of these types of home loans. Read on for advice on what will make a financial institution jump at the opportunity to give you a direct mortgage.
Banks are willing to offer clients portfolio loans because they can make money. They also provide this type of in-house home financing to keep prized clients happy. Nonetheless, you’ll need to present solid financials to entice your bank to offer you this lending opportunity.
It’s a smart idea to ask your current banker about portfolio loan opportunities. You’ll have a more substantial chance at obtaining this kind of loan from a local financial institution that is very familiar with your money situation.
You can also reach out to other lending companies who might give you private financing. Don’t forget that you’ll likely pay higher fees with a new lender. The increased cost might well be worth it to enter into Eugene’s competitive housing market.
Last Thoughts
Lastly, a portfolio loan is an excellent alternative to typical mortgages. By partnering with a bank for the life of the home loan, you’ll enjoy more flexibility in obtaining a mortgage.
There are many terrific ways to finance a home purchase. The experienced home loan officers at Strategic Mortgage Solutions understand how to match our clients with ideal mortgage opportunities. Contact us today, and we’ll help you locate the best loan for your family.
