Mortgage lending is based on the concept of the 4 Cs – Credit, Collateral, Capacity, and Capital…

 

Credit

Good credit is essential to obtaining the best possible mortgage financing terms. Your credit score is based on information provided by the three credit bureaus – Equifax, Experian, and TransUnion. Your credit score is based on these factors (in order of importance): payment history, amounts owed versus amounts available, length of credit history, new credit inquiries, and the mixture of credit types (like credit cards, car notes, mortgages, etc.).

Inaccuracies in your credit report can negatively affect your credit score. Our preferred lending partners are available to help you review your credit report and may be able to help you resolve any inaccuracies.

Collateral

Lenders need to determine that the property is good collateral for the loan, which is why lenders require appraisals, inspections, surveys and title insurance.

Capacity

Lenders think of capacity as the customer’s ability to repay the loan. The main factors in establishing capacity are available income and the stability of that income. To determine capacity, lenders will ask for verification of your income and employment. The monthly debt payments on your credit report will be compared to your income to determine your debt-to-income ratio, which is an important factor in qualification.

Capital

Buying a home is a significant, long-term investment for both the customer and the lender. With that in mind, the lender will require proof that the customer has sufficient funds available for down payment (if required), closing costs, and any cash reserves required. While cash reserve requirements differ from program to program, a cash reserve account can be a valuable tool for new home owners.

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