Conforming Loans Versus Portfolio Loans
Conforming loans are 30 year fixed rate residential mortgage loans that conform to Fannie Mae and/or Freddie Mac conforming mortgage lending standards. In order for Fannie Mae and Freddie Mac to purchase residential mortgage loans from private mortgage lenders to sell on the secondary market, the mortgage loans originated by mortgage lenders need to meet the guidelines set by Fannie Mae and/or Freddie Mac.
Fannie Mae And Freddie Mac
Fannie Mae and Freddie Mac are the two mortgage giants who sets mortgage lending standards. These mortgage lending guidelines and standards set by Fannie Mae and Freddie Mac are referred to as conforming to Fannie Mae and Freddie Mac. In order for a mortgage lender to be able to sell their mortgage loans that they originate, they need to conform to Fannie Mae or Freddie Mac’s guidelines. For example, with condominium loans, for a condominium buyer to be able to get a condominium loan with 5% down payment, the condominium complex needs to be 51% or more owner occupied in order to meet conforming standards. If it is not 51% or more owner occupied and the condominium complex is 51% or more rental units, the condominium unit buyer cannot qualify for a conforming loan because it does not conform to Fannie Mae or Freddie Mac mortgage lending guidelines. Any mortgage loans that are not conforming, is called non-conforming loans. Non-conforming loans cannot be sold to Fannie Mae or Freddie Mac and the mortgage lenders who originate and fun non-conforming loans are called portfolio lenders.
What Are Portfolio Loans And Portfolio Mortgage Lenders?
Portfolio lenders are lenders who do not sell the loans they originate to Fannie Mae or Freddie Mac. Most portfolio lenders keep the mortgage loans they originate and fund in their own books until they mature. Portfolio lenders set their own mortgage lending guidelines and normally require larger down payments since they normally cannot have private mortgage insurance and need to protect their assets. Condotel financing, non-warrantable condo loans, Jumbo loans, and unique property mortgage loans are examples of portfolio loans.
Types Of Portfolio Loans
Jumbo loans up to $3,000,000 are portfolio loans that are available with 20% down payment to qualified Jumbo Mortgage loan applicants. Minimum credit score required is 680 FICO and maximum debt to income ratio caps is set at 40% DTI.
Jumbo mortgage with 10% down payment is available to Jumbo mortgage borrowers with credit scores of 740 FICO and debt to income ratios no greater than 40% LTV. If your credit scores are under 740 FICO, contact me at www.gustancho.com and I will help you boost your credit scores to 740 FICO or higher so you can qualify for a Jumbo mortgage.
Asset depletion program are for mortgage loan borrowers who do not have documented income but have documented assets. It is a form of no income and/or no doc mortgage loan program where the lender will use 5% of the assets as annual income for income qualification purposes. The asset depletion program is ideal for those borrowers who have no income via traditional income but have assets. For example, if you are retired and have $2,000,000 in retirement or investment account, 5% of the $2,000,000 or $100,000 can be used as your annual income to qualify for debt to income ratios.
Expatriate And Foreign National Mortgage Loan Programs
Foreign nationals normally cannot qualify for conforming mortgage loans. Our expatriate and foreign national mortgage loan program now offers mortgage loan financing for those foreign nationals who do not have a green card but has a valid work permit and is employed by a company in the United States or a U.S. subsidiary of a foreign company. No credit scores are required and no credit tradelines are required either. Minimum down payment for expatriate and foreign national mortgage loan program is 20% down payment and one years of reserves are required.
Condotel Financing is now available. Condo Hotel Mortgage Loans are all portfolio mortgage loan programs. Condotel Loans are 30 year mortgage loans but only available as an adjustable mortgage rates; 3/1 ARM, 5/1 ARM, and 7/1 ARM. Minimum loan size is $100,000 and the condo hotel unit needs to have at least one bedroom and a full kitchen and be at least 500 square feet. 25% down payment is required for primary and second home condotel mortgage loans and 40% down payment is required for investment condotel mortgage loans. One year reserves are required for the primary residence as well as the proposed new condotel unit. Minimum credit score of the borrower that is required is 680 FICO. Maximum debt to income ratio is at 40% and potential rental income cannot be used for debt to income qualification purposes.
Non-Warrantable Condominium Financing
If you need financing on a non-warrantable condominium, the minimum down payment required is 20% down payment and need a credit score of 680 FICO. One year of proposed housing payment is required as reserves and the maximum debt to income ratio cap is 40%. Non-warrantable condominiums are condos that do not qualify under conforming lending guidelines due to having 51% or more of the condominiums in the complex as rentals and non-owner occupants.