Have you ever wondered how a lender makes decisions? Who qualifies for credit, and why? After you apply for credit, all you can do is wait and wonder. But what if you could get inside the lender's head? That might make the waiting easier.
There are four primary factors (often referred to as the four C’s) considered when a lender determines credit-worthiness.
Capacity: Does the buyer have sufficient income to repay the loan.
Capital: Cash reserves (Savings), investments, property or assets possessed by an individual that may be liquidated.
Credit: Lenders will review an applicant’s credit history. Your overall credit history provides the lender a credit score that indicates creditworthiness.
Collateral: The value of the property that the borrower owns which is pledged as security for the satisfaction of a debt is considered collateral. For a mortgage loan, the collateral is the home you are buying.
