What is a portfolio lender? A portfolio lender is a bank or other lending institution that makes mortgage loans with the intention of holding the loans (in-house) in their investment portfolio as opposed to selling their mortgages on the secondary mortgage market to a third-party organization – the largest of which is Fannie Mae.
Unlike lenders who sell mortgages, portfolio lenders are not required to adhere to Fannie Mae’s underwriting requirements since they are not selling their mortgages.
For investors who wish to mortgage more than 10 investment properties, working with portfolio lenders is the best route to pursue because Fannie Mae imposes a limit of 10 mortgages per individual.
However, just because portfolio lenders likely won’t have a cap on the number of mortgages a single person can have, they will likely have a limit on the total amount they will loan to you.
In my experience, depending on your financial situation, this limit will be somewhere between $1M-$3M. However, you can pursue multiple portfolio lenders if you need more funding.
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Where To Find Portfolio Lenders
Portfolio lenders tend to be your smaller community banks that are privately owned. Simply do an internet search for banks in the area you want to buy in, filter out the big national banks, and start calling.
These banks typically handle investment propertiy loans as commercial loans, so you’ll want to ask to speak to someone in commercial lending. When the commercial loan officer picks up, just let the loan officer know that you are a real estate investor looking for a bank to finance your investment properties. It’s likely they will want to meet you in person, and here are some questions they will probably ask you:
- How long have you been investing in real estate?
- How do you purchase your properties? Cash, financing, hard money, etc.
- What are your real estate goals?
- What kind of properties are you buying? single/multi-family, commercial, move-in ready, fixer-upper, etc.
- Are you a full-time real estate investor, or do you have outside employment?
- Do you have a business partner?
If the meeting goes well, and they think you’re someone they’d potentially like to do business with, they will probably want you to furnish two years of tax returns, and fill out a personal financial statement. Here’s a sample PFS.
Once a portfolio lender decides to work with you, there are two options you need to carefully consider: purchase mortgage or cash-out refinance. Check out our post “Purchase Mortgage vs. Cash-Out Refinance.”
Here’s a great video about portfolio lenders