Capacity
Can you truly afford the payments along with other living and credit expenses? Lenders want to know if you can handle all of your debt and if you’ll be able to repay the mortgage loan. Your income is reviewed and we will crunch some numbers to determine your debt ratios.
Character
As past behaviours predict future tendencies, lenders put weight on your past payment responsibilities, how long you have been employed with the samy company, and how long you have lived at your present address. Lenders look for clients that show stability and reliability.
Collateral
How marketable is the property you are purchasing? Is it unique? How much money are you putting down? Alternative lenders look to the marketability of the property to offset things like debt ratios, credit score, and non-job related income confirmation. You always need to think about the ability to pay-off the mortgage in the event of unforeseen circumstances. The property provides a way to recover at least a partial amount if you were to default on the mortgage. If your application is weak in some of the 5 C’s of credit, the lender might ask for more money to be put down on the property so that their collateral position becomes stronger (reduced loan-to-value ratio).
Credit
Credit is one of the few instances where past performance is an indicator of future results. Your credit score carries a lot of weight when you apply for a mortgage. History tells us that the majority of clients pay their mortgage first, their car second, and the rest after – we will review your credit bureau completely so we are able to convey the complete story to the lender on any credit hiccups that you may have encountered.
Before you apply for a mortgage, you should take the time and review your credit report with a Mortgage Professional. If you find any mistakes, it’s best to clear them up right away. (Your broker can help you with this!)
Capital
This is your net worth. It is assets minus liabilities. Are in a positive position? Will you have access to any funds should you encounter any unforeseen circumstances. Typically, the largest form of capital is the amount of money that borrowers have invested in a property. Otherwise known as a down payment, lenders want to see how invested you are in a property before making a decision. The source of down payment is also very important as it can affect the decision on the required loan to value (LTV) is a measurement used to determine the amount of funds required as down payment, in addition to rate and terms of the mortgage.
