Houston sub prime mortgage loans are about a third of all Houston metro loans. These are loans that don’t qualify for prime mortgages because of credit problems or limited credit history. Sub prime loans have higher finance rates to compensate the lender for an increased risk.

The leading lenders in the subprime market include Countrywide, New Century, Option One, Fremont, Washington Mutual, and First Franklin. Some brokers that do these mortgages have agreements to originate loans with a variety of finance sources. An advantage of using a broker is that multiple lenders can be shopped with a single application. It is generally not necessary for each lender being shopped to pull a credit report. The broker can give the lender information from they report already run and the lender can provide eligibility and rate information from that. The lender should give you a good-faith estimate of the terms and explain the costs to you. The rate and some of the closing costs may be negotiable.

Increasing foreclosures in sub prime have resulted in tightening of qualifications. It is a good idea to check your credit several months before application. That gives you time to correct mistakes and possibly improve some negative items. For example if you have a small collection or charge off you may be able to settle it. Try to be caught up on open accounts if possible. Your most recent 12 months of mortgage or rent are important, try not to have any payments more than 30 days late. There are a lot of ways to get a mortgage approved so don’t assume that you don’t qualify before you check it out!

Texas residents can get more information at our Houston mortgage office or call at 281-537-7800.