The 3 C’s

The 3 C’s

One of the very first conversations we have with clients about the home mortgage loan process is about “The Three C’s”. These three sections – covering creditworthiness, a borrower’s ability to pay, and the type of property the loan is for – are major factors that the lender takes into consideration with each new loan application.

The Federal Home Loan Mortgage Corporation, known as “Freddie Mac”, is a public government-sponsored enterprise that purchases home loans in the secondary market. Freddie Mac describes The Three C’s exceptionally well – as follows:

Credit reputation, capacity, and collateral are often called the “Three C’s” of underwriting. If one of these components is not acceptable or if there is excessive layering of risk across components, the mortgage may not be acceptable for sale to Freddie Mac.



  • Debt ratios: Qualifying monthly housing expense-to-income ratio or monthly debt payment-to-income ratio
  • Salaried versus self-employed borrower
  • Cash reserves
  • Number of borrowers
  • Loan Characteristics:
    • Product: a 15-, 20-, and 30-year fixed rate, an adjustable rate mortgage
    • Purpose of Loan: purchase or refinance (cash-out or no cash-out)

Credit Reputation


  • Credit Score
  • Foreclosures, bankruptcies, liens and/or judgments
  • Mortgage delinquencies
  • Credit delinquencies, repossessions, collections, or charge-offs
  • Credit accounts: type, age, limits, usage and status of revolving accounts
  • Borrower’s request for new credit in last 12 months



  • Borrower’s total equity or down payment
  • Property type: a 1-unit or 2- to 4- unit detached property, Condominium Unit or Manufactured Home
  • Property use: Primary Residence, Second Home or Investment Property

Questions or Concerns?

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Advantage Lending

Attn: "The Mortgage Professors"

7521-101 Mourning Dove Rd

Raleigh, NC 27615

Equal Housing Opportunity Lender

NMLS ID#56871


NMLS Consumer Access

We are employed by and all loans closed through Advantage Lending, licensed in North Carolina, Mortgage Lender License NC # B-194034.