What does a lender look for when approving my loan?
There are “4 C’s” of a loan approval.
Capacity – Can you repay the debt? We will ask for employment information including your previous occupations, how long you have worked and how much you earn. Essentially we’re verifying that your current job situation and income levels are stable.
Credit History – Will you repay the debt? We’ll look at your past credit history to see how much you owe, how often you borrow, whether you pay bills on time and whether you have a history of living within your means.
Capital – Do you have enough cash to meet the down payment requirements associated with your pending mortgage, closing costs, taxes, and insurance? Do you need a gift from a relative? Will you have a cushion left after your home purchase or will you use your last penny on purchasing your home?
Collateral – Will we be fully protected if you fail to repay the loan? We must be sure the property you are buying is sufficient to back up the loan.
- Will my fixed rate mortgage payment fluctuate throughout the life of the loan?
- How will my taxes be paid?
- What is private mortgage insurance (PMI) and how does it benefit me?
- What is an escrow account? Why do I need one?
- How long will it take to close my loan?