The 5 Cs of mortgage borrowing
When it comes to approving you for a mortgage, your lender will look at many elements of you and your application before deciding to take that on or not. You are essentially auditioning for each lender, and there are many factors that will go into the likelihood of you being approved. Here’s the 5 Cs of mortgage borrowing:
- Credit: firstly, your lender is going to look at your credit. They will be looking at not only your credit score, but also your past repayment habits. Missed payments from the past will show up on your credit report as well, so ensure you have a solid record at the time you go to apply.
- Capacity: by capacity, we mean the capacity for you to pay your loan and on time. This means your current income and job will come into play to ensure there’s enough stability and money to support a mortgage.
- Capital: money, of course. How much money will you be putting for a down payment? What is your net worth? Questions like this will be asked by your lender and you’ll have to go through all of your income sources and expenses.
- Collateral: the details of the property you are trying to purchase will need to be given to the lender as well, so it’s a good idea to get pre-approved so you can do some shopping around.
- Character: at the end of the day, your lender is going to need to decide whether you are a reasonable lending risk. Your character will definitely come into play in addition to the other four factors listed above.
Do you have questions about the mortgage application process or getting pre-approved? Feel free to contact me, or tweet me.
