Ethical Homes

A portfolio lender is one that makes loans that it does not intend to sell on the secondary mortgage market.

For most lenders, loans (of any length) are short-term investments, as the loans are quickly sold on the secondary market, allowing the lender to “cash out” their investment and “reinvest” the proceeds by lending them out to other borrowers. A portfolio lender, on the other hand, doesn’t sell the loan, and in stead keeps it in their own internal investment portfolio (hence the name).

Borrowers who have trouble qualifying for a conforming loan should look into using a portfolio lender, as these lenders have more flexibility about the criteria that they use for qualification. That extra flexibility usually means extra risk to the lender, however, which also means that more unusual loans (e.g. loans where the borrowers have unusually high qualifying ratios or large down payment gifts) usually have higher rates.