The 4 C's of Qualifying

By
Real Estate Broker/Owner with Morningside Homes, LLC 720-231-5200 DRE# ER300941

 

Qualifying for a mortgage can be explained with 4 C's.  Capital indicates the borrower has the necessary funds for the down payment and closing costs without exhausting their savings.  Capacity shows that the borrower has the ability from income to pay back the loan.  Credit history reveals the borrowers FICO score, which is a composite of payment history, amounts owed, length of credit, new accounts and the different types that are open.  The final C is for collateral proving that the home's value will secure the loan.

To protect consumers and the lending market, the Dodd Frank Reform Act became law in January 2014.  The Qualified Mortgage Rule affects the underwriting standards that most lenders use to qualify buyers.

The ability to repay rule states that financial information must be supplied by the borrower and verified by the lender.  The borrower must have enough assets or income to pay back the loan which limits the maximum debt-to-income ratio of 43%.  To present a more accurate picture of the costs to the borrower, teaser rates can no longer hide a mortgage's true cost.

A maximum of 3% in upfront points and fees can be paid on behalf of the borrower.  There can be no negative amortization, interest-only or balloon payments and the loan term limit cannot exceed 30 years.

While there are more requirements, most deal with good underwriting practices that are followed by reputable lenders such as considering and verifying things that affect the ability to repay the mortgage like income, assets, employment status, simultaneous loans, debt, alimony, child support and credit history.

Even though most mortgage lenders are bound by this law and its many rules, all lenders may not deliver the service that you expect and require.  For a recommendation of a trusted mortgage professional, give me a call at (720) 231-5200.

Posted by

Buy or Sell with Patty Clark              Denver/Aurora Co. and surrounding areas 

Chris and Patty

    Helping Families Move with Care

  If you would like to be sent properties on a daily or weekly  basis just call or email me and let me know your wants and  needs. A match will be made with a home you love and with  monthly payments you can afford. I specialize in first time                       home buyers and sellers who are ready to make a move.

                                                    

 

Morningside Homes, LLC
patty@morningsidehomes.com

www.morningsidehomes.com
Cell: 720-231-5200                       CRS,GRI,WCR,SFR,CNE, MRE

 

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