Even though an applicant can afford a mortgage today, will he or she continue to pay on it for years in the future?  In short, what is the applicant’s financial reputation?

The best guide to a person’s future action is the person’s past actions.  The obvious place to start is with the applicant’s credit history.  How has he/she handled previous mortgages?  Has the applicant had trouble with credit cards?  Has he/she paid off a car in a timely fashion?  How the borrower will pay is usually discernible with established credit.

One of the most important indicators of loan performance is the borrower’s credit quality.  Each adverse credit rating points to an increase of 2 to 4 times the likelihood of default.  In evaluating credit, be sure the borrower has:

- Demonstrated a willingness to pay as agreed

- Proven an ability to manage finances over time and under different Circumstances


Keep in mind that the borrower’s overall pattern of making payments is more important than an occasional late payment.  Apply the same credit quality standards to all borrowers.