What is a Portfolio Loan?
A portfolio loan is a mortgage loan that the lender keeps on its own books rather than selling to secondary market agencies like Fannie Mae or Freddie Mac. Because the lender retains the loan, they can use their own underwriting criteria rather than conforming to agency guidelines. This flexibility makes portfolio loans valuable for real estate investors who do not fit conventional lending boxes.
Why portfolio loans matter for investors
Conventional conforming loans have strict rules: maximum 10 financed properties per borrower, DTI limits, documentation requirements, and property type restrictions. Portfolio lenders can waive or adjust any of these because they are taking the risk themselves. This means: more than 10 financed properties, interest-only periods, blanket mortgages across multiple properties, loans on non-warrantable condos, and creative underwriting based on asset strength rather than personal income.
Typical portfolio loan terms
Higher interest rates than conventional (usually 0.5-2% above market). Shorter terms (5-10 year balloons with 25-30 year amortization are common). 20-30% down payment. May require a banking relationship (depository accounts with the lender). Closing costs similar to conventional loans.
Where to find portfolio lenders
Local community banks and credit unions are the most common portfolio lenders. They keep loans in-house because they are too small or non-conforming for the secondary market. Large national banks rarely portfolio residential investment loans. Start with community banks in your market and ask specifically about their investment property lending programs.
For wholesalers
Buyers using portfolio loans may have slightly longer closing timelines (3-4 weeks) but can close on properties that conventional lenders would reject. Knowing which local banks portfolio investment loans helps you recommend lenders to your buyers.