When you apply for a mortgage the first thing the lender will ask is, “How is your credit?” The state of your credit is very important because it helps to determine what options are available to you. The information in your credit history affects the amount of credit and the interest rate that you can qualify for.

Your tri-merged credit report, obtained by a Home Advantage Mortgage loan officer, helps decide your credit-worthiness. Poor credit results from late payments and other derogatory reports from any credit source, usually from poeple you do business with. To understand your credit score and how to improve your credit standing, read the 31 FICO facts about your credit score.

If you have poor credit, you can still obtain a mortgage. Home Advantage Mortgage works with several sub-prime lenders for borrowers with past credit problems. We receive mortgage approvals from them everyday. One sub-prime lender may say “no” but another can gladly say “yes”. Sub-prime lenders are in the business of approving tough loans.

A sub-prime mortgage lender looks at three main factors before approving or rejecting a loan. First, the lender reviews your credit. How do you pay your bills? What is your credit score? Do you have any liens, collections, or judgments? Although there can be reasonable explanations for problems here, too many problems can reflect how you pay your future debts.

Second, the lender looks at your ability to repay the new mortgage. Even though a mortgage lender may approve a mortgage despite your bad credit, they do not want to take your house through foreclosure. You need to prove that you have the ability to repay the debt. Therefore the lender looks at your job time, job history, and the likelihood that you will continue to generate enough income to satisfy the debt. Often a self-employed borrower may have trouble proving income. Home Advantage Mortgage has programs designed specifically for the self-employed borrower. These include no-income and limited asset verification programs.

Third, for a refinance, the lender looks at the equity in your home or, for a purchase, the lender looks at the amount of your down payment. If you have bad credit, a mortgage lender wants more equity or a stronger down payment. They are more comfortable providing money when you are invested in the property, thinking you are more likely to make the mortgage payments. Essentially, you, the borrower, must overcompensate for the bad credit.

Each borrower with problem credit is unique. The best way to determine the appropriate program for your situation is to speak with a loan officer at Home Advantage Mortgage. We provide you a free credit report and review all your options directly over the telephone.