This may take you back to the Sesame Street days. Today we're going over the letter 'C'.
When it comes to mortgage underwriting there are (4) key elements that should be in your arsenal of knowledge.
1.) Capacity-In other words comparing the borrowers income to the approximate debt. It is essentially the borrowers ability to repay the debt incurred by purchasing the home.
2.) Credit- This is a combination of your payment history, overall debt compared to available debt as well as the type of monies such as revolving credit vs. installment outstanding debt. Whew....that was a mouthful, I know!
3.) Cash- This refers to cash in the deal as well as reserves. Essentially this means that a larger payment will result in a more robust loan application.
4.) Collateral-In this situation refers to the appraisal of your home.
The larger the down payment the less debt owed and the amount of cash in your reserves can often help tip the tables in your favor should you have any credit issues. Not always, but it is a great start.
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