Transform Your Home Search with Portfolio Loans
One of the biggest reasons people want to own a house? Freedom. When you buy a house, there’s something magical about being empowered to make it your home. Maybe you’ll remodel the kitchen, perhaps even set up a chicken coop in the backyard.
Owning a home is liberating. The only downstairs neighbors you have to worry about disturbing are your family members. Purchasing your own place also provides stability and security. You’ll build equity and won’t have to worry about landlord stressors.
When people start the path to homeownership, the home mortgage loan approval process can feel challenging and confusing. It’s no secret that individuals often feel overwhelmed when applying for mortgage loans—particularly because qualifying can be difficult. Securing an FHA (Federal Housing Administration) loan, VA (Veterans Affairs) loan, and even a conventional loan has become more challenging in recent years. Stringent guidelines have made it tough for many hardworking people to purchase homes for their families, especially if they’re self-employed with irregular income or currently in an atypical situation.
In Comes the Portfolio Loan
If conventional loans haven’t been working out, a portfolio loan, also known as a portfolio mortgage, may help you achieve your goal of owning a home. Great Midwest Bank considers portfolio loans as part of our common-sense approach to lending. Approval for a portfolio loan is not guaranteed, but we’ll determine your options after a thorough financial evaluation during the application process.
Let’s dig further into what a portfolio loan is, and how it differs from other home loans.
If you’re looking for home mortgage options—including a portfolio loan—contact your local loan officer. We’d love to talk with you and see what’s possible.
You may not have heard the term “portfolio loan” and are perhaps wary of the term now that you have. Nothing to worry about! At first, a portfolio loan may sound like a high-end product for investors—not homebuyers. It’s a lot less intimidating than it sounds, and these loans can provide a helpful and accessible option for a variety of unique situations. Let’s explore what this type of loan actually is.
A portfolio loan is a home loan a mortgage lender keeps in its investment portfolio, hence the name. That is to say, the loan will not get sent over to another second-party lender in the market. This type of loan can be a helpful choice for families that may not fit into the traditional lending model. If the lender determines an applicant is a good candidate, a portfolio loan may be offered as an option.
People seeking home mortgages often aren’t aware of portfolio mortgages. This type of loan is not always advertised, and many lenders actually don’t offer them. Great Midwest Bank, however, does work with qualifying individuals to set up portfolio loans when it’s the right fit for them. Despite being lesser-known, portfolio loans can be the best type of home loan for many people.
Great Midwest Bank Simply Local Portfolio Loans
When Great Midwest Bank offers a portfolio mortgage, we service the loan in-house for the whole life of the loan. That also means we will work with you directly if there’s ever anything necessary to address regarding the loan. We’ll be able to set the standards for the loan, and we want to do so with your best interests and needs in mind.
Additionally, when you open deposit accounts at Great Midwest Bank, your money stays in the community. Banking locally gives banks like GMB the ability to extend more loans to local people, which helps other families secure a home of their own, too. You can feel confident that your loan is in good hands at Great Midwest Bank, and know that you’re helping to do some good for the economy of the local community.
What Are the Differences Between a Conventional Mortgage Loan and Portfolio Mortgage Loan?
A conventional, or conforming home mortgage adheres to guidelines set by Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation). This means it’s not insured or guaranteed by the federal government. Lenders have very little wiggle room in getting borrowers qualified for a conventional mortgage loan.
When you establish a conventional mortgage loan with a lender, your mortgage account probably won’t stay with that lender forever. Conventional loans are commonly sold to Fannie Mae or Freddie Mac and therefore are taken out of the original lender’s accounts and control. Therefore, conventional loans must follow those entities’ strict guidelines when deciding whether or not to approve a loan. This ensures the original lender will have the option to sell the account to Fannie Mae or Freddie Mac in the future, if they so choose.
A portfolio loan, on the other hand, is different. The account will remain funded directly by Great Midwest Bank. This comes with a number of advantages:
- Greater underwriting flexibility, because it’s local
- Lower down payment requirements for many home mortgage borrowers
- Often lower monthly payments compared to conventional fixed-rate mortgages
- Serviced locally in Wisconsin by Great Midwest Bank
- A customized, personal approach that caters to your needs
Great Midwest Bank takes a common-sense approach to mortgage lending and explores every option for your particular needs. Portfolio loans provide just another opportunity for us to deliver locals a personalized customer experience.
Why Might a Borrower Not Be a Fit for a Conventional Mortgage Loan?
Let’s take a look at why a particular borrower might not fit into the conventional loan “box.” Certain life events, expenses, and other situations can have a negative impact on your credit score and general financial situation. This can include (but isn’t limited to) divorce, medical bills, or bankruptcy. Those factors can contribute to someone having difficulty qualifying for a home loan.
Lenders that offer portfolio mortgages consider a potential borrower’s whole situation—not just the standard items. The process takes a little longer, but it provides a more complete and fair financial picture. It’s an additional example of Great Midwest Bank’s common-sense approach to lending. Although not everyone will qualify, it’s a terrific option to explore.
Many common financial situations may make someone a good candidate for seeking out a portfolio loan. Some examples include those who:
- Are self-employed, with irregular income
- Have non-traditional credit
- Face judgments, liens, tax issues, or temporary financial hardship
- Have been formally offered employment but currently transitioning into the new job
The first group to take special note of is self-employed workers. They don’t always fit into the conventional mortgage box because their monthly income may fluctuate more, compared to a salaried worker. They might have months with higher income, and months with lower income, depending on a variety of factors.
Many people also have non-traditional credit. That is, they haven’t built up credit that is reflected in a TransUnion, Equifax, or Experian credit score. That doesn’t necessarily mean that they wouldn’t be able to keep up with mortgage payments. In fact, an individual with non-traditional credit may very well have a terrific history of paying their rent, utilities, and insurance fees…but none of that is captured in their credit score. Those are all considered non-traditional credit.
Temporary Financial Hardship Situations
Other financial situations, like judgments, liens, tax issues, and financial hardships can complicate one’s ability to secure a mortgage. Some other situations include the need for a second mortgage, having low documentable income but good net worth, or purchasing a home after something like a foreclosure.
Transitioning into a New Job
Another situation we may come across is that an individual is moving to Southeast Wisconsin. They had formally been offered employment in the area, but had yet to begin their new job because they were in the process of moving across the country before starting. Part of that process includes finding a home to buy for their family. However, they have a hard time qualifying for a conventional loan due to their inability to provide a record of payments from their current employer.
In most of these situations, a computer analyzing the application sees something that automatically triggers a red flag and rejects the application. Since Great Midwest Bank’s loan officers review each application submitted, we see the whole person and their whole situation.
If you’re facing any of these challenges, explore your options with Great Midwest Bank. Our skilled and friendly loan officers can analyze a person’s income and cash flow instead of just tax returns and traditional credit. This helps us make a common-sense decision when it comes to a portfolio loan.
Another Reason Someone Could Benefit from a Portfolio Mortgage: The Type of Home Purchased
Sometimes an appropriate reason to pursue a portfolio loan is related to the type of real estate a person is looking to buy.
Condos are regularly considered for portfolio loans. Oftentimes, condominiums do not check all the necessary boxes for conventional or FHA loans. Fannie Mae, Freddie Mac, and FHA loans specify particular guidelines that must be met by homeowners’ associations. If these standards are not met, the mortgage loan will not be approved. For example, these loans generally stipulate that to qualify for a loan on a condo unit, half of the units in the condo association must be occupied by owners. Condos and their respective homeowners’ associations might not always fit all of the necessary parameters, and traditional mortgage lenders won’t take the risk of making exceptions to these guidelines.
Unique properties with features or values that are unusual to the area and higher-priced homes are often great candidates for a portfolio loan, too. The reason? It’s challenging to find comparable properties, which is a key part of the appraisal process when securing a mortgage. Real estate comparables, often referred to as “comps,” are properties located in the same general area as the house you’re looking to buy, and that have similar square footage and features.
For example, maybe you’ve found the last old-fashioned cabin in an otherwise modern neighborhood. Or there’s a one-of-a-kind, Swiss Family Robinson-style treehouse home that flat out has no comps. Well, while that last one is unlikely, you get the idea. Some properties do not fit a clear mold. They’re unconventional, and therefore, they will have a harder time fitting into the guidelines of a conventional loan.
Changing Landscape Means Changing Needs
The importance of adapting is clearer than ever. The COVID-19 pandemic has brought about changes in people’s personal and financial situations, and that’s not something to ignore. Many businesses have taken hits, and people have switched jobs. Working from home is much more commonplace too, which adds even more pieces to the housing and financial puzzle. It’s a new chapter.
The housing market has seen rapid changes as well. Buying and selling effectively came to a halt in spring of 2020. When strict health safety restrictions were lifted and the market opened back up, there was huge buyer demand for houses, but proportionately much fewer houses for sale. So, in addition to many people facing their own financial uncertainties, they have found themselves in steep bidding wars when pursuing a home purchase.
Alternative loan options like portfolio loans are particularly relevant in light of the economical changes in the country today. They could be the edge you need to get back into the market.
Is a Portfolio Loan Right for You?
We’ve talked about the basics and common applications for portfolio loans. But, is this the right thing for you to pursue?
Although they are a less standard fare, portfolio loans serve a specific purpose—giving another option to people who have already explored other loan routes. Great Midwest Bank understands that temporary circumstances may prevent those who are able and responsible borrowers from fitting into the conventional loan “box.” We cannot guarantee that you will qualify, but we can tell you our loan officers will explore your whole situation to determine if you’re a portfolio loan candidate.
Portfolio loans can allow individuals to decrease the length of time that they are out of the housing market—perhaps otherwise working for months or years to get to the point where they can secure a more traditional loan.
Consider, as well, that refinancing is an option down the road. You may be able to secure a portfolio loan for the time being, then refinance to a more traditional mortgage when your financial situation improves.
A loan officer at Great Midwest Bank will help you determine if a portfolio loan could be the key to your new home. All it takes to get started is a conversation, and we’ll go from there to evaluate your options.
A ‘Simply Local’ Approach to Lending
At Great Midwest Bank, we value the relationships with our depositors and borrowers. We take the time to customize a solution one customer at a time. We know the Wisconsin housing market because we are Wisconsin homeowners. We’ve helped the local community secure the homes they have always wanted, and we’ve been there ourselves!
If searching for a loan is stressing you out, breathe. Our loan officers can put your mind at ease. They’ll review all available options, including a portfolio loan, and determine what best fits you and your needs. Great Midwest Bank will help you experience a State of BankquilityⓇ.
If you’re having trouble getting approved for a home mortgage, or don’t know where to start, Great Midwest Bank will work with you. Our amazing loan officers are happy to explain everything, every step of the way.
To learn more about our common-sense approach, check out our Home Mortgage Loans page. Or contact one of our experienced local loan officers today.
This post was originally published in September 2016. It was most recently updated in March 2022.