The 5 C's of Lending
The 5 C’s of Borrowing are what a lender is looking for when they are deciding wether to let you borrow their money to purchase, renew or refinance your home. Here they are explained:
CAPACITY - The lender looks at your income and debts to assess if you have the ability to repay the mortgage. They look at your income, employment history and stability. They want to know that you can afford the mortgage they are offering you.
CAPITAL - The lender looks at your down payment on the home or equity in the case of a renewal/refinance. They also look at household income, savings, investments and other assets that can help repay the mortgage loan.
COLLATERAL - A mortgage is a secured product, which means you are pledging your home as collateral. The property must be worth at least what is borrowed against it
CHARACTER - The lender will look at how reliable you are as a borrower; education, employment history and residence play a part here. The lender wants to know how you plan to use the money and will consider a requested loan’s purpose.
CREDIT - Your credit bureau for the last 6 years will be looked at; it provides a summary of your history at meeting credit obligations. Many lenders have a minimum credit score they would like an ideal client to have. The credit report that we can access is the same one that the bank and mortgage lenders look at. If you have concerns, book an appointment with us for a pro bono assessment. We can inform you of your current credit score and ways that you are able to increase it to where you would like to be.
For certain lenders all 5 C’s of borrowing need to be great, others specialize in clients who have certain areas requiring improvement. As certified Mortgage Agents we are able to provide you with a mortgage assessment and an improvement plan for now and your future.