What do lenders look for when a borrower submits for a loan?
• Capacity: Your ability to make your mortgage payments on time. This depends on your income and income stability, your assets and reserves (including the amount of income each month that is available after you have paid for your housing costs, debts and other obligations). “Capacity” is measured by the Debt-to-Income Ratio (your debt divided by your income). • Collateral: Property that is pledged as security for a debt. Collateral is measured by the Loan-to-Value (LTV) ratio. • Character: The ability to borrow money, as a consequence of a person’s past responsible use of credit. This is measured by the credit scores on the credit report.
