What You Need To Know About Portfolio Loans
Many self-employed people become discouraged because the mortgage process is so hard to navigate. Some lenders are especially unfriendly to the self-employed because they are unable to easily verify their income. This is why many self-employed people choose to get a portfolio loan. Here are three things you need to know about portfolio loans.
1. The Loan Is Held In House
In most cases, the loans are held in house with the respective credit union, bank or lender. This is a major advantage for many people. What many people do not understand is that the majority of loans are sold to a large, national agency. This means that your loan must conform to this agency's standards. Since self-employed people may not be able to qualify for a conforming loan, they should considering getting a loan held in house. The bank or credit union won't sell it, so the bank can determine the terms of the loan and what kinds of documentation the bank needs to verify income.
2. A Portfolio Loan Takes Into Account Many Factors
If you are applying for a conforming loan, you might only have to show a few things, like income, debt-to income ratio, and a down payment. However, with a portfolio loan, lenders will look at you as a whole to see how good of a risk you are. For example, they will ask you what kind of education you have, your savings account, rental history and much more. This will give the lenders an idea of how trustworthy you are.
For many, this helps. Even though their income may seem a little unstable since they are self-employed, they can still handle the loan. For example, they might have rented property for years without any late payments. Or they could have a very large savings account that can help if times get hard.
3. Portfolio Loans Could Have Different Rates
Another important thing to understand is that a portfolio loan could have different terms and rates than a conventional loan. For instance, with a conforming loan, you might get a 15 to 30 year fixed rate. However, with a portfolio loan, your lender might do a balloon payment with a lower rate, or they could do an adjustable rate mortgage. Understanding what kind of loan you are getting before you apply will serve to protect you.
These are just some things you need to know about portfolio loans. For more information on home loans, contact a professional lending organization, like MCS Bank, to discuss your options.