The Advantages of Different Types of Mortgage Lenders, continued..

PORTFOLIO LENDERS

Portfolio lenders are usually Savings & Loan institutions, and sometimes banks.  They are called "portfolio" lenders because they tend to originate loans for their own portfolio (usually adjustable rate loans), not for resale in the secondary market.  The distinction gets blurred because most portfolio lenders also engage in mortgage banking.

They will often pay more compensation to their  loan officers for originating a portfolio product than for originating a fixed rate loan.   You may also find that they are not as competitive as mortgage bankers and brokers in the fixed rate loan market, though this is no longer a hard and fast rule.

It is often easier to qualify for a portfolio loan, so they are often a lender of "second resort" for those who cannot qualify for a fixed rate loan.  If a loan officer is steering you towards "sub-prime" loans, it might be wise to check out a portfolio lender first.

Portfolio lenders also can serve as "niche" lenders because certain things are more important to them than meeting the more standardized underwriting guidelines of a mortgage banker.   An example would be a savings & loan which is more concerned with an individual's savings history than being able to fully document income. 

If you apply for a loan with a portfolio lender and you are declined, that's it.  You're done.  If you still think you should be able to qualify for a loan, you have to start over somewhere else. 

BANKS and SAVINGS & LOANS

Their major strength is that you will recognize their name.  Banks and Savings & Loans often operate as portfolio lenders, but as the lending world has changed, most also operate as mortgage bankers and sometimes brokers.

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