A portfolio loan is a loan that a bank issues to a borrower and, instead of reselling it on the secondary market as is customary with conventional mortgages, keeps the loan on its own books. These are also known as portfolio mortgages.
Borrowers who are unable to secure a conventional mortgage may qualify for a portfolio mortgage even if they have a less-than-sterling credit history. Since conventional loans, including FHA loans and VA loans, require a rigorous screening process, those looking to finance a home purchase who face obstacles to qualifying can turn to portfolio mortgages. These loans can be especially advantageous for real estate investors looking to expand.
How do portfolio loans differ from conventional loans?
Conventional loans have to meet certain underwriting terms, criteria that are aimed at ensuring that the loans are repaid. These loans are typically sold to other institutions, often government-sponsored entities like Fannie Mae and Freddie Mac, which package the loans into securities that are then sold to investors.
These standards protect those who invest in these securities, as well as the government agencies that back them. The loan criteria include:
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- A maximum debt-to-income ratio, typically 43%
- A higher credit rating, typically above 700
- A substantial down payment, which can range from a low of 3% for an FHA loan, to up to 25% for mortgages with better rates and lower fees
- Limits on how much money can be borrowed
Portfolio lenders, often smaller institutions and community banks that keep these loans on their own books, are not obliged to meet Fannie Mae and Freddie Mac’s high standards. Borrowers whose credit history is dinged by a previous foreclosure, divorce or bankruptcy who would otherwise be locked out of homeownership can sometimes achieve their goal through this process. But it’s important to know that lenders typically charge higher origination fees and higher interest rates, and they often write prepayment penalties into the contract.
Those looking for very specific terms, such as an unconventional payment schedule, may find that banks are willing to meet those terms in a loan they keep on their own books.
Upsides and downsides, for lenders and borrowers
There are advantages and drawbacks to these mortgages for both parties. From the bank’s side, most significantly, the lender is on the hook if the borrower defaults. (For that reason, they typically offer portfolio loans only to their best customers, whose business they are eager to have.) And since they aren’t soon selling the loans on the market, they don’t get an infusion of fresh cash to originate new loans.
These loans are useful for a variety of different borrowers:
- Those who are self-employed
- Those who have a high income or net worth but a low credit score
- Those who want to buy a property that needs such extensive renovation that it wouldn’t qualify for a conventional loan
- Those who need a loan larger than the conforming loan parameters (currently set at $548,250)
Buyers unable to make the sizable down payment that is required to qualify for a conventional loan, but who otherwise meet typical lending standards, may find a portfolio mortgage the best way to purchase a home or investment property. In these cases, private mortgage insurance may not be required even if the borrower is making a small down payment. The borrower also may get better and more consistent customer service because the loan doesn’t change hands.
Portfolio loans may serve investors well
Portfolio loans are advantageous for some real estate investors. Portfolio lenders typically don’t place a cap on the number of properties an investor can purchase, whereas traditional lenders may be reluctant to finance more than five investment properties.
These lenders don’t always require the property to be in a minimum condition, which makes them the best bet for an investor who wants to finance the purchase of a property in need of considerable renovation.
Related:
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The one small town worth visiting in every state
When it comes time to pick your next travel destination, some of the more common cities might top your list. New York City, Boston, Los Angeles, Seattle — these are definitely places you must visit at least once, but there are some smaller cities that should round out your travel bucket list. From charming mountain towns to secluded hot springs, here are the small towns you must visit in each state. (Note: Populations are based on 2010 census data.)
Bill Chizek
Population: 360
Perched on top of Lookout Mountain, Mentone is tourist destination because of its picturesque views and charming shops. Visiting is like stepping back in time. Stay at the Mentone Inn (from $135/night), a bed and breakfast with a big front porch for relaxing, and check out the oldest building in town, a log cabin built in 1870 that is part of St. Joseph’s on the Mountain Church. The real gem of the town, however, is DeSoto Falls, the 104-foot waterfall that’s at it’s roaring-best after a rainstorm.
James Deitsch
Population: 2,239
Cordova is quaint fishing village 140 miles east of Anchorage in the Copper River Delta. Nestled in the shadow of Mount Eccles, the town has epic mountain views. Though a peninsula and not an island, Cordova is only accessible by plane and ferry, helping it stay a hidden gem. Visitors can enjoy wild salmon, spectacular views and easy access to Alaska’s wilderness. Planning ahead? Visit in May during the Copper River Delta Shorebird Festival and see the 7 million western sandpipers that stopover during their migration.
julof90
Population: 5,575
This former mining town has charming historic architecture, quirky street art and epic red mountain views. Stay in the Copper Queen Hotel (from $89/night), the longest-operating hotel in Arizona and take a day trip to its namesake, the Copper Queen Mine, which was once the most productive copper mine in the state. In the evening, relax with a pint at St. Elmo’s, the town’s oldest bar.
reisegraf
Population: 2,073
Eureka Springs was founded as a spa town, making it an ideal vacation destination for weary Arkansas residents in need of a break. The town features carefully restored Victorian buildings and natural splendor — nestled in the Ozarks, it is surrounded by over 60 natural springs. Visit the beautiful glass Thorncrown Chapel, designed by an apprentice of Frank Lloyd Wright. You can also take a ride on the vintage steam and passenger cars of the Eureka Springs and Northern Arkansas Railway or explore quaint shops and cafes (chain stores aren’t allowed downtown).
Sounds relaxing, right? Make sure it stays that way with these 15 secrets to a stress-free vacation.
Tara Ballard
Population: 3,728
As the only incorporated town on Catalina Island, Avalon enjoys the distinction of being California’s only coastal island town. Technically part of Los Angeles county, Avalon feels worlds away, and at 22 miles from the mainland, you have to take a ferry to get there. Stay in a cute hotel or at one of five campgrounds on the island and spend your days exploring the protected wilderness and the incredible beaches.
mlauffen
Population: 4,540
Located at the base of Colorado’s epic Tenmile Range, Breckenridge is best-known for its skiing and other winter sports. But there’s more to the town than just fresh powder and steep slopes — it shines during the summer with river rafting and hundreds of hiking trails. Plus, The Breckenridge National Historic District is the largest historic district in Colorado, and visitors can experience the town as it was during the Gold Rush and after. Take a walking tour to get your fill of history, then head to the Arts District for galleries, performance spaces and even creative workshops.
Onfokus
Population: 4,205
Mystic is a charming coastal town that will make your dreams of New England quaintness come to life. Explore the Mystic Seaport, a recreation of a 19th century fishing village, complete with classic vessels like the world’s only remaining wooden whaling ship. Then head to the shops in quaint Old Mystic. And of course, no visit to the town is complete without a visit to Mystic Pizza, the pizza shop made famous by the film of the same name.
DenisTangneyJr
Population: 9,559
Nestled next to the Mispillion river, this small town offers big city feels. Take a trip to Mispillion River Brewing for some craft brews and tunes. Stroll along the Downtown Riverwalk and grab a quick bite at Abbot’s Grill. Peek into one the art galleries on Walnut Street or if you want to experience some nature, visit Abbott’s Mill or DuPont Nature Center.
Luka Lajst
Population: 6,119
Known for its laid back and relaxed atmosphere, Islamorada is a beachgoers paradise. Explore the expansive Indian Key Historic State Park to view remains of an 1830s shipwreck. Frolic at Anne’s Beach and take a dip in the warm crystal clear water or saunter on the boardwalk through the mangroves.
gilaxia
Population: 9,523
Previously a winter home to Henry Ford, Richmond Hill’s features stunning architectural facades dating back to the 1930s. If you rather spend your time exploring the outdoors, the coastal waters of Georgia are prime for fishing or you can try your luck at Sterling Links Golf Club with views of the rolling fairways.
torwai
Population: 3,970
A quintessential small beach town, Haleiwa’s popularity is on the rise for sun, surf and sand. Hang ten at Ehukai Beach, best known for its impressive waves and crowds watching surf pros catch some air. Don’t forget to grab a Hawaiian shave ice – a must have in the Aloha State.
steffiiiii
Population: 7,960
Surrounded by the Sawtooth National Forest, Red Devil Peak and Della mountains, Hailey is a haven for anyone who enjoys the great outdoors. Go back in time at Blaine County Historical Museum and explore the early lives of the inhabitants and pioneers.
shanecotee
Population: 3,314
Named after the mineral galena, this eponym city was the site of the first major mineral rush in the United States. Galena has been recognized for its Main Street, attracting shoppers with its historic red brick buildings, independent shops and epicurean dining. Want to stay right in town? Make sure you read these six ways to save on an Airbnb before you book a place to stay.
IanDikhtiar
Population: 1,897
Do rolling hills, charming towns and sandy dunes entice you? Then Williamsport is a must. Wander downtown for views of the Wabash River and visit Williamsport Falls — the highest falls in the state. Don’t forget to take a visit to the fairgrounds for live auctions, food and rides — and admission is free.
wundervisuals
Population: 442
The Amana Colonies, a group of seven villages settled by German Pietists, have turned into a major tourist attraction in Iowa since becoming a National Historic Landmark in 1965. Now home to cozy bed-and-breakfasts, craft shops, art galleries and Iowa’s first microbrewery, the charming community hosts culinary events and festivals, including, of course, Oktoberfest, all year round.
Robert_Ford
Population: 6,844
Named one of Smithsonian Magazine’s “Top 20 Small Towns to Visit in the U.S.,” the pioneer boom town of Abilene is also home to one of Kansas’ top attractions: The Eisenhower Presidential Library and Museum, which includes former President Dwight D. Eisenhower’s boyhood home and tomb.
Liderina
Population: 6,845
An official Kentucky Trail Town, Morehead is located within the Daniel Boone National Forest and home to Cave Run Lake, a 8,270-acre reservoir and fisherman’s paradise. More than 150 species of fish live in eastern Kentucky’s largest lake. And, if you’re not an angler, you can enjoy the town’s scenic trails, art galleries and railroad museum.
sturti
Population: 2,365
While there are certainly more scenic small towns in Louisiana that are more scenic, we suggest visiting Abita Springs, which is less than an hour outside New Orleans and home to one of the nation’s most intriguing roadside attractions. The Abita Mystery House, also known as the UCME museum, boasts “odd collections, memorabilia, pure junk and old arcade machines” (its words, not ours), plus miniature towns with animated displays activated via push-buttons.
rkupbens
Population: 3,570
This scenic coastal town is surrounded by the Camden Hills, which it why it proudly touts itself as “where the mountains meet the sea.” Home to the historic Camden Opera House, the town is a nature lover’s dream, hosting a variety of outdoor festivals and activities, including hiking biking, sailing, paddle-boarding and, in winter, skiing and snowboarding.
traveler1116
Population: 4,485
Go for the historic buildings — there are 47 of them noted in the National Register of Historic Places, including the Burley Manor. Stay for the Bathtub Races, an annual fundraiser in which participants race wheeled tubs, remit with brakes, steering and at least two gallons of water. (This sounds like the perfect event for the Toolman, just saying.)
vadimguzhva
Population: 2,642
A coastal resort town located at the very edge of Cape Cod, Provincetown has become a favorite summer hotspot for the LGBTQ community. Having long celebrated individuality and freedom of expression, P-town is home to the the Provincetown Art Association and Museum and Atlantic House, the oldest gay bar in the U.S.
Vadim Anvaer / istockphoto
Population: 4,944
Frankenmuth might have a small town feel, but it’s big on the world beer stage. Every May, the tiny village is host to the World Expo of Beer, featuring more than 300 different beers. And if that’s not enough, there’s also an Oktoberfest celebration every October.
RiverNorthPhotography
Population: 1,351
Sitting on Lake Superior, Grand Marais takes advantage of its lakeside location with an annual Dragon Boat Festival. As the name implies, this festival is filled with dragon-headed boats that race across the lake. Of course it’s complete with rowers and drummers, along with other (shorebound) activities for the whole family.
You always want to be prepared when you travel and the story of how renters insurance saved this couple’s vacation is certainly worth a read.
Jacob Boomsma
Population: 8,034
New Albany provides historic Southern charm in a modern-day setting. The small town was the birthplace of William Faulkner, and each September the city celebrates Faulkner Fest, which includes announcing the winners of the William Faulkner Literary contest. This is just one of a number of festivals New Albany sponsors year-round, so you’ll always find something to do. Want to go it on your own? There are plenty of nature routes and other attractions, like the Indian mounds, to check out.
_jure
Population: 4,410
Surprised by a French-named city in Missouri? Don’t be. Founded by the French, Ste. Genevieve was the first European settlement west of the Mississippi River. That means there’s a lot of history to enjoy, and also a lot of wine: Ste. Genevieve and the surrounding area is home to at least 15 wineries, vineyards and breweries.
Berezko / iStock
Population: 4,488
Polson is right on the southern shore of the gorgeous Flathead Lake, a natural freshwater lake, where you can catch all kinds of fish, from rainbow and brook trout to largemouth bass and kokanee salmon. Also, be sure to check out the Miracle of America Museum, which has been described as “one of the most impressive hodgepodge collections of Americana on Earth” by RV Travel.
David Butler
Population: 2,923
Minden provides ones of the best looks into America’s past. Whether you visit the Kearney County Historical Museum, the Minden Opera House or the Rowe Sanctuary (featuring “the second largest straw bale constructed building in the United States”), there’s history throughout Minden. If you want something a little more interactive, there’s always Pioneer Village, recreating and old American town with 26 complete buildings.
BrianAJackson
Population: 1,080
Don’t be confused: Alamo was named after the Texas historical site, but it’s in Nevada. Even though it’s not found near the Alamo, there are still plenty of cool things to do here — like take a short drive down Nevada State Route 375, aka Extraterrestrial Highway, to hunt for UFO sightings on your way to nearby Area 51.
If you’re into the supernatural or just general haunting stories, check out this story about how death can haunt your house hunt.
SrdjanPav
Population: 961
The defining feature of this petite town is a preserved 19th century brick and granite mill surrounded by a an old-fashioned village complete with a general store and farmers market. The town and its pastoral surroundings provide a great summer escape, especially if you need time away from crowds. (Bye, Manhattan madness.)
DenisTangneyJr
Population: 3,906
Whether you like art, shopping or fine dining, Lambertville has something for everyone. This town, founded in 1705, sits along the Delaware River and is considered a destination for antique hounds. And, according to the their website, “the town’s architecture is as interesting as its residents.”
aimintang
Population: 3,177
Chimayo is 40 minutes from Santa Fe in the foothills of the Sangre de Cristo Mountains. Visit El Santuario de Chimayo, a historic church whose dirt floor is said to have healing powers. Also check out the traditional weaving shops for even more town culture.
Michael Warren
Population: 309
For anyone looking to truly escape the crowds and congestion that is New York City, this is a great place to go — you probably have more people in your apartment building than this town does collectively. This relaxed town deep in the Catskill Mountains is filled with vintage shops and hip places to stay. The Phoenicia Diner is a favorite of Brooklyn hipsters.
Boogich
Population: 1,028
Banner Elk is considered the ski capital of the South. It’s located between Sugar Mountain Resort and Beech Mountain Resort, two of the biggest ski resorts in the region. But the town is a year-round destination for shopping and dining. The warmer months bring opportunities for outdoor activities like hiking and rafting.
ranplett
Population: 112
Tiny Medora is located within Theodore Roosevelt National Park. You can take in the unspoiled beauty of the Badlands and get a taste of historic old west culture with a carriage ride or visit to the North Dakota Cowboy Hall of Fame.
Image Source
Population: 138
18th-century sailors would “put into” this island bay to wait out bad weather on Lake Erie, giving this small town its name. For such a tiny place, there is lots of adventure to be found. Visitors can explore a cave, tour a winery and go parasailing.
Genius tip: If you’re an adventurous traveler, you’ll definitely want to read about what extreme sports junkies need to know when traveling abroad.
Yagi-Studio
Population: 6,187
Pauls Valley is a scenic stop on the Heartland Flyer passenger train on the way from Oklahoma City to Fort Worth, Texas. You can check out a 1902 steam engine near the station and indulge your sweet tooth at either the Bedre Chocolate or Field’s Pie factories. Bring the kids to the Toy and Action Figure Museum while you’re in town, too.
sandsun
Population: 9,477
Astoria is a coastal city with a lot of interesting history. You can check out the reconstructed fur-trading post known as Fort Astoria originally built in 1811, or zip forward a few decades to the Captain George Flavel House Museum to get a sense of how wealthy Oregonians lived in 1885. Picturesque Astoria is known for hosting many film productions, including lending its beaches to filmmakers for Free Willy and Free Willy 2. (And now I’ll have “Will You Be There” stuck in my head for the rest of the day.)
HaizhanZheng
Population: 7,620
What’s better than a small town with a historical background? If that’s what you’re looking for, you’ll find it in Gettysburg. Here you can visit the place where former President Lincoln gave his famous Gettysburg Address — Gettysburg National Cemetery — and see beautiful, historic architecture. In fact, many buildings even predate the Civil War.
AppalachianViews
Population: 6,425
Exeter’s agricultural districts feature fun activities like strawberry- and blueberry-picking, courtesy of farmsteads that have been around for many generations. Or, if you’re visiting in the winter, Exeter’s Yawgoo Valley features Rhode Island’s only ski resort.
grki
Population: 9,163
There is a ton to do in Georgetown, a small town with a bustling seaport and the hometown of former First Lady Michelle Obama’s grandfather (and many of her other relatives). When you’re here, a visit to the beautiful Georgetown harbor is a must. You can also visit many historical attractions, like Battery White Park or the Georgetown Light lighthouse.
Joesboy
Population: 6,627
There may not be many people in Sturgis year-round, but during the first full week of August, hundreds of thousands of bikers descend upon this little town for the 10-day Sturgis Motorcycle Rally. Even if you don’t come during this time, you can check out the Sturgis Motorcycle Museum and Hall of Fame or visit Bear Butte State Park for some outdoor adventures.
Plan to bike to Sturgis this August? Make sure you read this guide on insuring your motorcycle so you’re prepared.
Rex_Wholster
Population: 448
Townsend has a lot of natural beauty to offer, like the Tuckaleechee Caverns. They’re beautiful and there’s even an underground waterfall. Not a fan of the idea of going underground? There are plenty of other waterfalls to see around Great Smoky Mountains National Park. Or, if you’re looking for simple relaxation, float down the Townsend Wye in a raft.
NathanMerrill
Population: 1,981
Marfa is a cozy small town in Texas, but it has an unusual attraction: Unexplained “ghost lights” that appear at night throughout the town. If the paranormal gives you the heebie-jeebies, Marfa is still worth visiting, especially for its thriving modern arts community fostered in part by Donald Judd and his gigantic, outdoor sculptures of steel, aluminum and concrete.
earleliason
Population: 4,312
Talk about being in the heart of beauty. Well, in the circle of it, in this case, as Kanab is known as the “Grand Circle.” With the nearby National Parks, like Bryce, Zion and the Grand Canyon, and the gorgeous Lake Powell, the little town of Kanab has it all. Even the largest animal sanctuary in the country, Best Friends Animal Society, is here.
Genius tip: Between checking out the sites, make sure you hit up the old-school counter diner, The Junction, for some stellar burgers and shakes.
Robby_SixtyTwo
Population: 3,048
No, not that Woodstock. Think postcard-perfect farmhouses and a charming Main Street. So charming, in fact, that Budweiser once filmed a Christmas commercial in the town. If you visit, the must see destination is the Billings Farm and Museum, complete with a farmhouse and operating dairy farm.
DenisTangneyJr
Population: 2,941
This charming town is known for the wild ponies, aptly named Chincoteague ponies. They roam the beaches of the neighboring Assateague Island, where only animals live, and are brought to town by the local fire department each year. In addition to seeing the ponies, you’ll want to hop a ride on the island trolley and explore the beaches.
WilliamSherman
Population: 6,606
Sequim, also known as The Lavender Capital of North America, is home to several lavender farms and holds Lavender Weekend the third weekend of July each year. And boy do they go all out — street fairs, farm tours, concerts, food and so much more. But the main event, which you can see all year, is the lavender itself. Fields and fields of it, plus every lavender scented and flavored product imaginable. Several lavender farms are free to visit and may even let you pick your own sprigs.
republica
Population: 624
Get ready for some nature relaxation here. This sweet mountain town is home to restorative mineral springs, which are basically pools of hot water with healing properties. Think of it as natures spa. In fact, it’s thought to be the place that inspired the spas we think of today. And the outdoor fun here goes beyond the mineral springs. There’s hiking, biking, fishing, golf and pretty much any other outdoor activity you can think of.
GibsonPictures
Population: 2,172
When you visit New Glarus, also known as Swiss Town and America’s Little Switzerland, it’s like you ventured across the pond. The festivities here include Polkafest, Beer, Bacon and Cheese Fest, Blues, Brews and Food Truck Festival, and Swiss Volksfest (Swiss Independence Day), just to name a few. And if you like beer, you’ll want to stop at New Glarus Brewing Company, named one of the best breweries in the world.
andresr
Population: 1
No, that’s not a typo — this is the smallest town in the United States, home to only one person, Don Sammons. Don moved to town in 1980 with his wife and son, bought it a handful of years later. His wife later passed away and his son moved away, leaving Don as the only permanent resident. In 2013, the town was sold for a reported $900,000 to two Vietnamese men who now sell PhinDeli coffee at the convenience store. You can stop in for a cup, but the real highlight here is getting a picture with the town population sign.
This article originally appeared on Policygenius and was syndicated by MediaFeed.org.
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Featured Image Credit: Kerkez / istockphoto.
