Portfolio Loans: Finance Multiple Investment Properties Efficiently
Portfolio Loans: The Flexible Solution for Unique Borrowers
Not every homebuyer fits into the neat little box required by traditional lenders. If you have been rejected by a big bank because of "too many properties," complex income, or a unique property type, a Portfolio Loan might be the answer.
What is a Portfolio Loan?
Most mortgages are sold to the secondary market (like Fannie Mae or Freddie Mac) shortly after closing. This requires them to meet strict, standardized guidelines.
A Portfolio Loan is different. The lender (usually a local bank or credit union) keeps the loan on their own "books" (their portfolio). Because they aren't selling the loan, they don't have to follow the rigid rules of the secondary market. They set their own common-sense guidelines.
Best for:
- Real Estate Investors: Those who have hit the "10 financed properties" limit for conventional loans.
- Self-Employed Borrowers: People who show low taxable income but have strong cash flow.
- Unique Properties: Buyers of large acreage, hobby farms, or properties in poor condition that don't meet standard appraisal requirements.
- Credit Challenges: Borrowers who have had a recent foreclosure or bankruptcy but have re-established financial stability.
Key Characteristics
Portfolio loans offer flexibility that conventional loans can't match, but they come with trade-offs.
1. Unlimited Properties
One of the biggest advantages for investors is the removal of the 4-10 property limit. If you are building a large rental portfolio in Evansville, a portfolio lender can finance as many units as you qualify for.
2. Flexible Underwriting
Lenders look at the "big picture" rather than just a checklist.
- Income: May accept bank statements instead of tax returns.
- DTI (Debt-to-Income): Some lenders allow ratios up to 50% or higher if you have strong reserves.
- Asset-Based: Some decisions are based primarily on the property's cash flow (DSCR loans) rather than your personal income.
3. Common Requirements
While flexible, these aren't "easy money" loans. Lenders need to mitigate their risk.
- Down Payment: Typically 15-20% minimum (sometimes higher for investment properties).
- Credit Score: Variable, but often 620+. Stronger scores get better terms.
- Reserves: Lenders usually want to see 6 months of mortgage payments in the bank.
4. Terms to Expect
- Interest Rates: Generally 0.50% to 1.50% higher than conventional rates.
- Adjustable Rates (ARMs): Many portfolio loans are 5/1 or 7/1 ARMs rather than 30-year fixed mortgages.
- Prepayment Penalties: Common on investment property loans (e.g., a fee if you refinance within the first 3 years).
Why Use a Portfolio Loan in Evansville?
Evansville has a thriving investment market. Many local investors hit the conventional loan limit quickly. A relationship with a local portfolio lender allows you to:
- Scale Faster: Buy more rentals without hitting arbitrary caps.
- Buy Fixer-Uppers: Finance properties that need work, which traditional banks typically reject due to condition.
- Close Faster: In-house underwriting often means faster decisions and closings.
Getting Started
Because these loans aren't sold on the national market, you won't find them at every big-box bank.
- Shop Local: Look for community banks and credit unions in Vanderburgh and Warrick counties.
- Ask a Broker: Mortgage brokers often have access to non-QM (Non-Qualified Mortgage) products from national portfolio lenders.
Don't let a "no" from a big bank stop you. If the deal makes sense, there is likely a portfolio lender who will fund it.
