Four Cs - Lender's Language

Sometimes lenders can speak their own language. Let's take a quick look at what they closely look at to qualify borrowers. What lenders look at are the Four Cs of credit: Capacity, Credit History, Capital and Collateral.

Capacity - Can the loan be repaid? Lenders ask for employment information: occupation, duration of employment, and amount earn. They also want to know expenses: how many dependents, whether borrower must pay alimony or child support, and the amount of other obligations.

Credit History - Will the debt be repaid? Lenders look at credit history; how much is owed, how often loans are taken out, whether bills are paid on time, and whether borrower live within their means.

Capital - Is there enough cash for the down payment and for closing costs? Does the borrower need a gift from a relative? Will there be a cushion left after the home purchase?

Collateral - Will lender be fully protected if the borrower fails to repay? Lenders must be sure the property is purchased at a sufficient amount in order to back up the loan.

Be sure to tell your Loan Officer everything. Covering up past credit problems will create some bums along the road.

Have a great weekend!