The 5 C’s of Credit

Applying for a mortgage can be a nerve-wracking experience when you’re not sure what to expect. Before you go looking for credit, take a few minutes to understand what lenders are looking for:

How might you stack up in a lender’s analysis of the five C’s of credit?

CAPACITY

Be prepared to show that you can afford your payments. The lender will look at your income from all sources, and compare that with your monthly financial obligations.

CAPITAL

Your downpayment demonstrates that you can save and accumulate assets, and that you are more likely to do all you can to keep up with your mortgage payments.

COLLATERAL

This is the lender’s assurance that the mortgaged property is marketable and can be re-sold to recover the investment.

CREDIT

Your habits in meeting your debt obligations will be evaluated. Do you consistently pay your debts on time?

CHARACTER

Are you sufficiently trustworthy to meet your obligations? Your education and work experience will be factors, along with length of time at your current residence and job.