Mortgages and Portfolio Lending
Conventional mortgages are made by banks. When a landlord qualifies for a conventional mortgage, he can expect that the loan will be sold numerous times during the life of the loan. With a portfolio loan, however, the lender intends to hold on to the loan in their investment portfolio. This can mean a much greater degree of flexibility, for most portfolio lenders are smaller entities. Large banks and lending institutions are governed by shareholders, and therefore the ability to obtain a loan is in the hands of individuals who are seeking a profit.
Portfolio lenders, on the other hand, are usually smaller, community banks. The fact that they don’t have stockholders gives them a greater amount of flexibility. Conventional banks allocate a portion of the money they hold for mortgage lending. At times they need to make it more difficult to obtain a loan in order to keep their lending at the agreed upon percentage.
Some Problems with Mortgage Portfolios
Since the recession that hit this country in 2008, it has been more difficult for some borrowers to obtain a mortgage. Interest rates have remained historically low, but this is because of an artificial maneuver by the government. Unfortunately, obtaining a portfolio loan can also be much more difficult. Also, since most portfolio lenders are smaller entities, they generally are more vulnerable to financial downturns. This can mean trouble if your mortgage is with the failing bank. Finally, although portfolio lenders do not intend to sell their loans, there are situations that make this necessary, such as a recession.
The question of whether you will obtain a mortgage from a conventional bank or a portfolio lender is largely dictated by your credit worthiness. If your credit history is not strong, you may have to seek your mortgage from a portfolio lender. This is because these smaller institutions are able to offer loans at rates larger banks cannot.
Before You Obtain a Portfolio Loan
It is important as a landlord that you understand what you are getting when you obtain a mortgage. A Bryan real estate lawyer may be able to help you obtain the optimal loan that your credit worthiness allows. Call Peterson Law Group today at 979-703-7014 or 936-337-4681.