How Do Lenders Decide Loan Approval?
The Four “C’s” of Loan Approval • 1. Capacity • 2. Credit • 3. Collateral • 4. Character Capacity A lender will weigh your housing expenses and total debt against your monthly income to determine your ability to repay a loan. Monthly Income – Your net monthly income. If you’re self-employed or receive commissions or bonuses, the lender averages your monthly income over the last two years. Housing Expenses – This is the monthly payment you’ll have with the new loan, along with the monthly cost of insurance, property taxes and any homeowner’s fees or other costs. Total debt – Add up any current mortgages, credit card balances, child support or alimony payments, tuition, car loans or other installment loans that will take longer than 10 months to pay off and this is your total debt. If your monthly mortgage payment is less than 28% of your net monthly income, a lender will typically consider you qualified to repay the loan. That figure can even go as high as 36% depending on the buyer. Fo
1. Capacity 2. Credit 3. Collateral 4. Character Capacity A lender will weigh your housing expenses and total debt against your monthly income to determine your ability to repay a loan. Monthly Income Your net monthly income. If you’re self-employed or receive commissions or bonuses, the lender averages your monthly income over the last two years. Housing Expenses This is the monthly payment you’ll have with the new loan, along with the monthly cost of insurance, property taxes and any homeowner’s fees or other costs. Total debt Add up any current mortgages, credit card balances, child support or alimony payments, tuition, car loans or other installment loans that will take longer than 10 months to pay off and this is your total debt. If your monthly mortgage payment is less than 28% of your net monthly income, a lender will typically consider you qualified to repay the loan. This figure can even go as high as 36% depending on the buyer.
1. Capacity 2. Credit 3. Collateral 4. Character Capacity A lender will weigh your housing expenses and total debt against your monthly income to determine your ability to repay a loan. Monthly Income – Your net monthly income. If you’re self-employed or receive commissions or bonuses, the lender averages your monthly income over the last two years. Housing Expenses – This is the monthly payment you’ll have with the new loan, along with the monthly cost of insurance, property taxes and any homeowner’s fees or other costs. Total debt – Add up any current mortgages, credit card balances, child support or alimony payments, tuition, car loans or other installment loans that will take longer than 10 months to pay off and this is your total debt. If your monthly mortgage payment is less than 28% of your net monthly income, a lender will typically consider you qualified to repay the loan. That figure can even go as high as 36% depending on the buyer.
1. Capacity 2. Credit 3. Collateral 4. Character Capacity A lender will weigh your housing expenses and total debt against your monthly income to determine your ability to repay a loan. Monthly Income – Your net monthly income. If you’re self-employed or receive commissions or bonuses, the lender averages your monthly income over the last two years. Housing Expenses – This is the monthly payment you’ll have with the new loan, along with the monthly cost of insurance, property taxes and any homeowner’s fees or other costs. Total debt – Add up any current mortgages, credit card balances, child support or alimony payments, tuition, car loans or other installment loans that will take longer than 10 months to pay off and this is your total debt. If your monthly mortgage payment is less than 28% of your net monthly income, a lender will typically consider you qualified to repay the loan. That figure can even go as high as 36% depending on the buyer.
Capacity A lender will weigh your housing expenses and total debt against your monthly income to determine your ability to repay a loan. Monthly Income – Your net monthly income. If you’re self-employed or receive commissions or bonuses, the lender averages your monthly income over the last two years. Housing Expenses – This is the monthly payment you’ll have with the new loan, along with the monthly cost of insurance, property taxes and any homeowner’s fees or other costs. Total debt – Add up any current mortgages, credit card balances, child support or alimony payments, tuition, car loans or other installment loans that will take longer than 10 months to pay off and this is your total debt. If your monthly mortgage payment is less than 28% of your net monthly income, a lender will typically consider you qualified to repay the loan. That figure can even go as high as 36% depending on the buyer. For instance, many lenders will allow a first-time buyer’s housing expenses to take up more
