The “Five Cs” of creditIn today's economical environment the lenders are more stringent when making the decision on whether or not to approve your mortgage loan?
Do you have good habits? This means, do you pay your bills on time, what is the stability of your career and are you willing to provide information and answer questions in regards to your credit report. My clients character is strengthened and application process simplified when all financial information is fully disclosed - tell me everything so I can properly represent you.
Estimated amount of debt you can carry to obtain a mortgage - We look at your gross income and your total debt and ensure you are only using approx 42% of your income to cover all your debt including the new mortgage loan, property taxes and heat for the home.
We also look at your revolving credit to ensure you are not maxing out the limits and that the loans are not all brand new.
Capital refers to your net worth — the value of your assets minus your liabilities. In simple terms, how much you own (for example, car, real estate, cash, and investments) minus how much you owe.
It is also your ability to manage your finances and accumulate assets while repaying your debt on time.
Collateral refers to any asset of a borrower. Can your assets back your debt. For example - Do you have a car worth $20k but you owe $20k on it which means you don't have an asset. You could have a $20k RRSP and owe $15k in debts which means you have a net worth of $5k to the positive which is what we want to see:)
Lenders consider a number of outside circumstances that may affect my borrower’s financial situation and ability to repay, for example what’s happening in the local economy. If my borrower is a business, the lender may evaluate the financial health of my borrower’s industry, their local market, and competition.
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