The “3 C’s” that lenders consider when you apply for a home loan are:
- Credit History, or FICO score
- Capacity to repay, or your debt-to-income (DTI) ratio
- Collateral value, or loan-to-value (LTV) ratio
Your financial picture is based largely on a combination of credit scores from the “big three” credit reporting agencies, Experian, Equifax, and TransUnion. Your credit reports have information about your debts, loans and payment history. Higher scores may result in lower in lower interest rates.
Capacity to Repay
Lenders consider your ability to meet the financial obligations of the new loan by evaluating your overall indebtedness compared to your total income, or DTI ratio. A low DTI indicates that you have the ability to take on an additional monthly payment.
Collateral is the value of your home compared to the amount of money you’re borrowing for the loan. A low LTV (Loan-To-Value) ratio decreases the risk to the lender of the property falling below the amount of their investment.
To speak with a licensed Loan Originator or to get started with your application, call us at 866-514-7283.