The 4C’s of Mortgage Lending

Here’s what he had to say about the meaning of the 4C’s and how you can improve on them.

1. Credit: Mortgage underwriters will want to see a good credit history and acceptable credit scores. Late payments on major credit (mortgages, auto loans, etc.) will jeopardize your ability to secure financing. In this category, a credit score of 740 or above is considered excellent and will yield the best pricing for rates and PMI factors if you are putting <20% down.
2. Collateral: This is simple. The home you are purchasing, or the home you are refinancing, will be appraised to ensure the value is there, and to make certain determinations with respect to the trend of future appreciation of the location where you are buying or residing. It is important to note here that mortgage loan values are calculated by the lower of either the purchase price or appraised value when purchasing a home.
3. Capital: Also known as ASSETS, which are determined by what liquid funds are available for the down payment and closing costs. What other assets (stocks, bonds, 401K, etc.) are available for post-closing reserves? In this category, the more assets you have, the easier it is for underwriters to arrive at a positive final decision on your loan.
4. Capacity: This is my favorite category, and where I spend most of my time when counseling my clients. It focuses on your ability to repay the loan. It really is just another term for the “debt-to-income" ratio, which measures your income in relation to your expenses.

Did you know that in one five-minute phone call I can help you determine the maximum mortgage you would qualify for based on your capacity alone?

Please feel free to reach out through any of the ways below and I would be delighted to provide you with a free, no obligation, summary of your access to mortgage money.

Michael Hendrickson
Senior Mortgage Loan Officer NMLS 368372
p. 904.614.0309
c. 904-614-0309
michael.hendrickson@usbank.com

U.S. Bank
9822 Tapestry Park Circle
Jacksonville, FL 32246