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Florida Portfolio Loans: What Everything Means

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Getting the right financing deal for your real estate pursuits can be difficult because some asset types and loan amounts can fall outside of the scope of traditional mortgage lenders. However, you may benefit from flexible, investor-friendly loans from a Florida portfolio lender.

Read on if you're unsure where to start or whether portfolio loans suit you. We'll break down everything you need to know about securing a portfolio loan in Florida and how they can help you achieve your real estate investment goals.

What Is a Portfolio Loan?

A portfolio loan, in a nutshell, is a mortgage where the lender both originates and retains a loan rather than making a mortgage and selling it to a mortgage market/secondary company. Most mortgages aren't owned by their issuing banks.

Instead, they're issued by a bank or credit union and those mortgages are then sold on the secondary market to institutions like Fannie Mae or Freddie Mac.

Portfolio loans stay within the primary lender's portfolio, so the lender retains mortgage ownership. This specific setup has several unique advantages and disadvantages that prospective homeowners or aspiring investors should understand.

How Do Portfolio Loans Operate?

Portfolio loans are usually more flexible in terms of their approval requirements. Since lenders retain complete control over the loans, they also have full control over their approval requirements and lending parameters. 

Thus, you may be able to get a portfolio loan without little to no income verification or other financial documents that would normally lock you out of homeownership. You can also use a portfolio loan to purchase a property that is not Fannie Mae approved like vacant land or a non-warrantable condo. 

However, portfolio loans usually come with origination fees and higher-than-average loan interest rates. Depending on your mortgage terms, you may be saddled with additional constraints, like prepayment penalties.

Essentially, portfolio loans operate much more flexibly than their traditional counterparts. Remember, a lender retaining ownership of a mortgage loan can be good or bad depending on the nature of the loan itself and the underwriting process.

Portfolio Loans in Florida

Many homeowners and real estate investors seek out portfolio loans in Florida specifically because this state's real estate market has become very competitive and many borrowers are struggling to qualify for a traditional mortgage. 

The Florida real estate market continues to attract a variety of buyers, from out-of-state migrants, to retirees, to remote professionals, and more. Partnering with a local portfolio lender could give you the edge you need to achieve Florida homeownership and compete with cash offers. 

Portfolio loan options/loan programs can be used for investment properties, refinancing a single-family home, renovating a multifamily property, or anything else.

Benefits of Portfolio Loans

If you obtain a portfolio loan, you may benefit from several distinct advantages. Some of the most critical include:

  • Flexibility
  • Good Choice For Self-Employed Borrowers
  • Helpful for Real Estate Investors

Flexibility

Firstly, portfolio loans are much more flexible than traditional mortgage loans. As noted above, portfolio lenders have complete control over what requirements and constraints they impose on their loan contracts. 

This flexibility extends to super jumbo loans (i.e., you need multi-million dollar financing for a big project or investment). Most traditional lenders have limits to loan amounts, and anything over $1M will be difficult to qualify for with a traditional mortgage. 

Good Choice For Self-Employed Borrowers

Next, portfolio loans can be beneficial mortgage options for self-employed borrowers. Many traditional mortgage lenders don't have as much confidence in self-employed borrowers, like business owners or freelancers.

Portfolio lenders will often only require a copy of your bank statements to get you approved. This means you won’t need to submit 2-years worth of tax returns, pay stubs, or W-2s. 

Helpful for Real Estate Investors

In order to secure a good deal, real estate investors need to move quickly. Which is why qualifying for a traditional mortgage can be a hassle for most investors, especially if they are competing with cash offers. 

However, a portfolio loan’s streamlined process and minimal documentation can allow an investor to get the financing they need in days, not weeks. This makes a portfolio loan a great option for investors that want to leverage debt but close as quickly as a cash offer might. 

It’s also a great option for real estate investors who want to finance more than two properties under a single mortgage. A cross-collateral portfolio loan, also known as a blanket loan, is a great way for investors to use existing equity from their portfolio to purchase a new investment property. 

Drawbacks of Portfolio Loans

Even though portfolio loans have some benefits, they also have some notable downsides to keep in mind. Some of the most critical include:

  • Prepayment Penalty
  • Higher Interest Rates
  • Higher down payment 

Prepayment Penalty

For starters, most portfolio loans come with prepayment penalties. This is contingent on the lender you choose to sign with. Vaster, for example, does not charge a prepayment penalty, allowing you to pay off your loan more quickly if your financial situation improves unexpectedly.

Still, keep this potential downside in mind and make sure to ask your lender if there are any fees associated with paying off the loan early. 

Higher Interest Rates

In addition, portfolio loans frequently have higher than average interest rates. These interest rates can make a portfolio loan more expensive. Most portfolio lenders should be able to give you a clear breakdown of the costs associated with the loan, such as closing costs and monthly mortgage payment, so you can make an informed decision. 

Higher Down Payment 

Lastly, most portfolio loans have higher minimum down payment requirements. Traditional mortgages usually require anywhere from 5% to 20% of the total price as a down payment. Portfolio loans take on more risk by keeping the loan on their balance sheet, and therefore will require a higher down payment of 30%-50%.

How To Get a Portfolio Loan in Florida

You can get a portfolio loan from a variety of different lenders. Most portfolio lenders are private lenders or smaller financial institutions, like local credit unions or banks. 

You can get a portfolio loan in Florida by contacting local banks, credit unions, or a private lender like Vaster. 

The Bottom Line

South Florida's real estate market is constantly shifting, and understanding all of your mortgage options is key to making the right financial move. That's why it's wise to work with a one-stop-shop mortgage lender like Vaster, that can put the best options in front of you and select a mortgage product that aligns with your needs. 

Vaster has helped South Florida investors and homeowners, with over $130 million loans originated in 2022. Our knowledgeable and experienced loan officers can assist with all matters related to real estate financing, including buying a pre-construction condo or residential vacant land. 

Don't wait — contact Vaster today to learn more about how we can help you find the right mortgage, designed for you. 

Sources:

How can I tell who owns my mortgage? | Consumer Financial Protection Bureau

Portfolio Loans: What Are They and How They Work | Bankrate

What is a credit score? | Consumer Financial Protection Bureau

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