Finance
What is 'portfolio lending' and why might a Pennsylvania buyer benefit from it?
AA lending program for buyers of multiple investment properties
BWhen a lender keeps loans in its own portfolio rather than selling them on the secondary market, allowing more flexible underwriting standards✓ Correct
CA PHFA program providing portfolio loans for affordable housing developers
DA type of mortgage where the borrower pledges a financial portfolio as additional collateral
Explanation
Portfolio lenders (community banks, credit unions, private lenders) keep loans in their own portfolio rather than selling to Fannie Mae or Freddie Mac. Because they're not constrained by secondary market guidelines, portfolio lenders can offer more flexible underwriting — qualifying self-employed borrowers with non-standard income, financing unusual property types, or lending to borrowers with temporary income interruptions.
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Key Terms to Know
Debt-to-Income Ratio (DTI)
A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
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