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Look, I've been working with borrowers for years who have solid finances but don't fit into the neat boxes that traditional lenders require. Back when I was onboarding about 70 people from a closed Cleveland office, I spent months working remotely with folks who had all kinds of different financial situations—and I learned real quick that not everyone's path to homeownership looks the same. Maybe you're self-employed with income that fluctuates throughout the year. Maybe your credit took a hit during a tough period but you've rebuilt your financial life. Or maybe the property you want to buy needs some serious renovations before it's move-in ready.
That's where portfolio loans come in.
A portfolio loan is a mortgage that a lender originates and keeps as part of their own investment holdings instead of selling it to investors on the secondary mortgage market. According to the Urban Institute, portfolio loans comprised 31.5% of new mortgages in the third quarter of 2024, a significant increase from less than 25% in 2022.
Unlike conventional loans that must meet strict criteria set by Fannie Mae and Freddie Mac, portfolio lenders can set their own underwriting standards. This gives them the flexibility to look at your complete financial picture rather than just checking boxes on a standardized form. Between you and me, this is often the difference between getting approved and getting turned down for borrowers with unique circumstances.
Here's what you need to know about how these loans actually function. Traditional lenders typically sell most mortgages they originate to government-sponsored enterprises or investors in the secondary market. This process, which the Consumer Financial Protection Bureau (2025) regulates to protect consumers, helps lenders free up capital to make more loans.
But to sell a loan on the secondary market, it has to meet conforming standards. These include minimum credit scores, maximum debt-to-income ratios, required down payments, and limits on loan amounts that vary by location. For 2025, the baseline conforming loan limit is $806,500 for single-family homes in most areas, according to the Federal Housing Finance Agency, though this increases in high-cost areas.
Portfolio lenders can't sell their loans because they don't follow these standardized criteria. Instead, they evaluate each borrower on a case-by-case basis, considering factors that traditional underwriting might overlook. This includes looking at your liquid assets, investment income, rental property cash flow, and even the potential value of a property after renovations.
Not gonna lie, this flexibility comes with a price. Since portfolio lenders keep these loans on their books and assume all the default risk themselves, they typically charge higher interest rates and fees to compensate. Based on current market data from Optimal Blue (2025), portfolio loan rates in October 2025 generally range from 6.5% to 9%, compared to conventional mortgage rates averaging around 6.19%.
Let me show you how this plays out with real numbers. Say you're buying a $400,000 home with a 20% down payment:
That's a difference of $280 per month and about $100,400 over the life of the loan. So you need to weigh whether the ability to qualify now and buy the property you want is worth that additional cost.
I've helped borrowers figure out their options for years, and I've seen portfolio loans work really well in some cases. Not everyone needs these, but they can be a lifesaver if you do.
If you own a business, work as a freelancer, or are an independent contractor, you know that your income doesn't always show up clearly on a W-2. Just to let you know, my wife is a real estate agent, so I see this all the time. Her income changes a lot throughout the year, with some months being very busy and others being very slow. Traditional lenders just want to see steady paychecks. But whatever. Lenders want to see two years of steady tax returns with steady income, but that doesn't always show how much money you can make or how much money you have right now. The Small Business Administration says that there are more than 33.2 million small businesses in the US. This means that there are millions of people who could borrow money but don't have traditional income documentation.
Portfolio lenders can check your bank statements, 1099s, business income, and even contracts you have in the future to see if you can pay them back. They might also look at your cash and investments as ways to make up for the loss.
Your low credit score doesn't tell the whole story. Your score may have gone down because you got divorced, went bankrupt due to medical bills, or were out of work for a while, but you have since rebuilt your finances. Experian's research from 2025 shows that things like these can lower credit scores by more than 100 points, even for borrowers who had been responsible before.
Most regular loans need credit scores of at least 620 to 640, but some portfolio lenders will work with scores as low as 580, and sometimes even lower if you have strong compensating factors like a lot of assets or a large down payment.
Portfolio loans can be very helpful if you're buying investment properties, especially if they're multiple units or need work. Traditional lenders usually only let you finance a certain number of properties, usually four to ten, depending on the program. These rules don't apply to portfolio lenders.
The National Association of REALTORS® (2025) says that 17% of home purchases in 2024 were for investment properties. This is a big market that often needs flexible financing.
Most loan programs have a maximum debt-to-income ratio of 43% to 50%. But if you have a lot of assets, rental income, or other things that make up for your debt, portfolio lenders may let you have DTI ratios as high as 48% or even higher in some cases.
No one talks about this part. Traditional lenders won't give money to condos that don't meet certain criteria, such as the percentage of owners who live there, the amount of money in the HOA's reserve fund, and the status of the building's completion. Portfolio lenders can lend money for these condos that don't have a warranty, as well as properties that are used for more than one purpose, properties with a lot of land, and homes that need a lot of repairs.
Portfolio lenders have some leeway, but they still have rules. Based on how things are going in the market right now, here's what you can expect.
Most portfolio lenders want credit scores between 620 and 680, but some will accept scores as low as 580 for borrowers with a lot of assets or a large down payment. Bankrate (2025) says that different lenders have very different credit score requirements, and some may even be 40 to 60 points lower than normal.
Depending on the lender, your credit history, and the type of property, down payments usually range from 15% to 30%. Most of the time, people who want to buy investment properties or who are more likely to default on their loans need to put down more money. Some specialized portfolio lenders may have programs that only require 3% to 10% down for borrowers with good credit and a steady job.
This is where portfolio loans really stand out. Lenders can accept other types of proof of income, such as bank statement loans (which are usually 12 to 24 months of business or personal bank statements), asset depletion loans based on your liquid assets, and debt service coverage ratio calculations for investment properties.
Portfolio lenders can help you buy properties that traditional lenders won't, like ones that need a lot of work, mixed-use buildings, large lots, and condos that aren't warrantable. But they will still need an appraisal and may have their own rules about the type and condition of the property.
Not every lender offers portfolio loans. You can usually find them at smaller regional banks, credit unions, and community banks that focus on building relationships with their customers. These businesses usually value long-term relationships with customers more than the number of transactions.
When I help borrowers who need these options, I always tell them to start with the banks and credit unions where they already have accounts. If you already have a relationship with the lender, your chances of getting approved go up a lot, and you may be able to get better terms.
The Nationwide Multistate Licensing System (2025) says that you can check the credentials and licensing status of any lender by looking up their license number. Always make sure that the lenders you work with are licensed in your state and haven't broken any major rules.
At AmeriSave, we mostly deal with conventional, FHA, VA, and USDA loans, but we know that some borrowers need special types of financing. We're always happy to talk about your situation and help you look into all of your options, including sending you to trustworthy portfolio lenders when it's appropriate.
Let me show you both sides so you can make a smart choice.
Let's be honest for a second. Not everyone should get a portfolio loan, but if you can't get traditional financing, they can really help. And this is where it gets interesting: the key is to figure out if the higher costs are worth the chance to buy now instead of waiting until you can get a regular loan.
I've seen people use portfolio loans to get ahead in life. They get a portfolio loan to buy the property now, and then they refinance to a regular loan after they have paid off debt, improved their credit, or made improvements that raise the value of the property. The Mortgage Bankers Association (2025) says that the number of people applying to refinance went up a lot in late 2024 and early 2025 as rates went down.
But hold on, there's more. Wait a second, let me back up. What I really want you to know is that you need to think carefully about your long-term plans before getting a portfolio loan. The higher rate might not matter as much if you're buying an investment property that will bring in a lot of rental income. If you're buying a home to live in and think your income or credit will improve a lot in the next few years, you might want to refinance to get lower rates pretty soon.
In the end? Portfolio loans give you the freedom you need when you need it most, but that freedom comes at a cost. Before you sign anything, look at several lenders, know all the fees and terms, figure out the true long-term cost, and make sure you have a clear plan for how this loan will help you reach your bigger financial goals.
I get it. This stuff is complicated, and deciding whether a portfolio loan makes sense requires careful consideration of your unique financial situation and goals. But here's my challenge to you: don't let the complexity paralyze you. If you're in a situation where traditional financing won't work, portfolio loans might open doors that otherwise would stay closed.
Start by gathering your financial documents and assessing your situation honestly. Then reach out to local banks and credit unions to explore your options. Compare multiple lenders, ask detailed questions about rates and fees, make sure you understand the true long-term cost.
And remember, whether you end up choosing a portfolio loan, conventional financing, or another option entirely... the most important thing is making an informed decision that aligns with your financial goals. At AmeriSave, we're here to help you explore your options and find the best path forward.
Most lenders require credit scores between 580 and 680 for portfolio loans, but the exact requirements vary a lot. Portfolio lenders look at your whole financial picture, not just your minimum scores like most other loans do. Many portfolio lenders will still look at your application if your credit score is below 620 but you have strong compensating factors like a lot of cash on hand, a large down payment, or steady rental income from investment properties. Some lenders will work with scores as low as 580, but you'll probably need to put down at least 20–30% and pay higher interest rates. The most important thing is to show that you can pay back the loan by showing that your finances are strong as a whole, not just your credit score. Remember that even with portfolio loans, higher credit scores will always get you better rates and terms.
Portfolio loans usually have interest rates that are 0.5 to 2 percentage points higher than regular mortgages, and they also have higher origination fees. As of October 2025, the average interest rate on a conventional mortgage is about 6.19%. The interest rate on a portfolio loan can be anywhere from 6.5% to 9%, depending on your financial situation and the lender. This rate difference means that on a $300,000 loan, you will pay about $175 to $420 more in principal and interest each month. Also, the fees for starting a portfolio loan are usually between 1% and 5% of the loan amount, while the fees for starting a regular loan are usually between 0.5% and 1%. The total extra cost can be anywhere from $50,000 to $150,000 or more over the course of 30 years. But you need to think about these costs in relation to the benefits of being able to buy now instead of waiting, especially if property values are going up or if rental income will cover the higher payments.
Yes, you can refinance from a portfolio loan to a regular mortgage, and once you qualify for regular financing, it often makes sense to do so. Many people who take out portfolio loans use them as a way to get started. Then, when their credit score goes up, their debt-to-income ratio goes down, or the value of their property goes up because of renovations or the market, they refinance. To successfully refinance, you must meet the requirements for a conventional loan, which include having a credit score of at least 620-640, a debt-to-income ratio of less than 43-50%, and enough equity in the property. Some portfolio loans have prepayment penalties for refinancing within the first few years, so always read your loan documents before refinancing. You need to get a new appraisal, check your credit, and prove your income when you refinance. But the savings from lower rates are often worth these costs, especially if you plan to keep the property for a long time.
Portfolio loans give you a lot more options for the types of properties you can buy than traditional loans do. You can get loans for properties that most traditional lenders won't touch, like condos that don't meet Fannie Mae or Freddie Mac requirements, mixed-use properties that combine residential and commercial space, properties that need major repairs or renovations, investment properties with more than four units, unique properties like homes on large acreages or with unusual construction, and properties that are worth more than the maximum loan amount. Every portfolio lender has its own set of rules about what properties they will and won't lend on. This means that one lender might accept a property that another lender won't. The lender will still need a professional appraisal to figure out how much the property is worth and make sure it is good enough collateral for the loan. Investment properties and properties that need repairs usually need bigger down payments, usually 25–30%, to make up for the extra risk to the lender.
The time it takes for a lender to approve a portfolio loan varies, but it usually takes between one and six weeks, depending on how complicated your financial situation is and how complete your paperwork is. Some portfolio lenders can give you a preliminary approval in just a few days and close your loan in as little as 7 to 14 business days if your application is simple and all the paperwork is in order. But underwriting may take longer for complicated situations like self-employment income, multiple properties, or a lot of assets. When you give all the paperwork up front, like tax returns for the last two years, bank statements for all accounts, proof of assets and reserves, proof of rental income if you have it, and a completed loan application with correct information, the approval process goes faster. Because portfolio lenders look at applications one at a time instead of using automated underwriting systems, you should expect to talk to your loan officer more often as they try to find a loan that works for both you and the lender's risk requirements.
One of the best things about portfolio loans is that many of them don't need private mortgage insurance even if the borrower puts down less than 20%. But this depends on the lender and the loan program, so when you're looking for portfolio loans, you need to ask about PMI requirements. Some lenders may offer portfolio loans without PMI, but they may charge a little more in interest to make up for the higher risk. Like regular mortgages, some loans with less than 20% down may need PMI. If you need PMI, the monthly cost is usually between 0.5% and 1% of the loan amount each year. For a $300,000 loan, this can add $100 to $300 or more to your monthly payment. Even if the interest rate is a little higher, avoiding PMI can make portfolio loans cheaper each month, especially if you're putting down 10–15% instead of the full 20% that conventional loans require.
Community banks and credit unions are the most common places to get portfolio loans, but they're not the only ones. Smaller banks that focus on relationship banking rather than high transaction volume, local and regional banks that keep most of their loans in their portfolio, credit unions that only serve certain membership groups, and some specialized mortgage companies that focus on niche lending are the ones that usually offer portfolio loans. Because their business model is based on making loans to sell to the secondary market, larger national banks don't often offer real portfolio loans. But some big banks have departments that handle portfolio lending for wealthy clients or certain types of properties. The best thing to do is to start with banks and credit unions where you already have accounts or relationships. Existing customers often get better service. You can also ask mortgage brokers about portfolio lenders in your area. Brokers often work with more than one portfolio lender and can help you find the one that is best for your needs.
In the mortgage industry, the terms "portfolio loans" and "non-QM loans" are often used to mean the same thing, but there are some small differences between them. A "non-qualified mortgage" is a loan that doesn't meet the Consumer Financial Protection Bureau's standards for interest rates, fees, loan terms, and some other features. Instead of selling them to the secondary market, lenders keep portfolio loans on their books. Most portfolio loans are also non-QM loans because they don't meet the standards for qualified mortgages. Most non-QM loans are kept in the lender's portfolio because they can't be sold to Fannie Mae or Freddie Mac. Both terms refer to loans with more flexible underwriting rules that help people who don't fit into traditional lending categories. When you shop for these kinds of loans, you might hear lenders use either word. However, they usually mean the same thing: a group of flexible financing options. It's more important to understand the specific loan terms, rates, and requirements than to get caught up in the language.
Yes, first-time home buyers can absolutely use portfolio loans, though they're less common for primary residences than for investment properties. Portfolio loans can be very helpful for first-time buyers who have saved up a lot of money for a down payment but can't get a traditional loan because their credit scores are low, they have had recent credit problems like student loan defaults or medical collections, they are self-employed and have trouble proving their income, or they have a lot of debt compared to their income from student loans or other debt. But first-time buyers should think carefully about whether a portfolio loan is a good idea compared to government-backed loans like FHA loans, which usually have lower rates and down payment requirements of only 3.5%. For a 3.5% down payment, FHA loans only need a score of 580. For a 10% down payment, they only need a score of 500. If you're a veteran, look into FHA, VA, USDA, and state first-time home buyer programs before choosing a portfolio loan for your first home.
Even if the portfolio lender goes out of business or sells their loans, your loan is still valid. Mortgages are legal agreements that stay in effect even if the lender changes hands. You still have to make your payments on time according to the loan terms. When a portfolio lender closes or sells their loan portfolio, one of a few things usually happens: another bank buys the loan portfolio and takes over servicing, a loan servicing company is hired to collect payments and manage the account, or the FDIC steps in if the bank fails and transfers loans to another bank. You should be told about any changes to the loan's ownership or servicing, along with new payment instructions and contact information. When the lender sells or transfers your loan, your interest rate, payment amount, and loan terms cannot change. Even during the transition period, keep making your regular payments on time and keep all the paperwork related to the loan, such as your original promissory note, mortgage agreement, and payment records. If you're worried about the stability of your lender, you can use tools like the FDIC's BankFind tool for banks or the National Credit Union Administration's database for credit unions to check on the health of financial institutions.
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