Did you ever wonder how lenders and banks decide to approve a loan request?

Lenders & banks review what we will call the 5 “C’s” of lending.

CREDIT
CREDIT SCORE
COLLATERAL
CAPACITY
CHARACTER

How strong your application is in these areas will determine what loan programs you qualify for, the terms, rate, and your monthly payments.

Here’s a quick example of what a lender looks for in each of these 5 key areas:

CREDIT: How much credit you have is just as important as a credit score. In fact, the credit score is made up by most of the items listed below!

Factors of credit reviewed include:

  • How many lines of credit appear (Several are best but too many can also hurt)
  • How long you have had them open (the longer the better)
  • Paying them on time
  • Types of credit (mortgages vs credit card debt)
  • Bankruptcies, foreclosures, collections, liens, and judgments
  • Inquiries (how many places you’ve applied for credit)

That’s why it’s critical you have an expert assist you in reviewing your credit.

CREDIT SCORE: Credit scores have become extremely important over the past 10 years. Scores range from 450 to well over 800. The higher the credit score the better your chances.

Scores are determined by your overall credit picture (the items covered above).

COLLATERAL: This is the home you own (on a refinance) or wish to purchase. The home is used to secure the loan. Lenders may or may not request an appraisal be performed on your home to determine its worth. The appraiser compares your home to others in your neighborhood to determine the value of your property. Click here for a free appraisal of your home.

CAPACITY: This relates to your ability to make your payments each month. Lenders will add up your all your debts (less meals, auto insurance, & other miscellaneous expenses) and divide it by your monthly income. The calculation is called your debt to income or debt ratio. The lower the percentage the better! They also perform some other income calculations to determine if you can truly afford the new loan program & payment obligation.

Some loan programs also require that you have assets, which could be used should you lose your job or experience a major increase in your monthly bills.

CHARACTER: This touches on how stable you are in both how long you’ve been at your job and lived in the property. If you’ve held your job for a long time or live in the house a long time, lenders feel you are a better risk.

If you are not as strong in some areas, it could hurt your chances at landing the best programs and rates.

We’ve got loan programs that fit almost every borrower need or situation.

We offer a free credit analysis and can help show you the way to get a fresh start. We will work hard to find the best loan that fits your needs right away!

Apply now and we will contact you about the next steps!

Why wait? Now is the time!