Re/Max Realty Specialists Inc.,
Brokerage Independently Owned & Operated
*Sales Representative

Blog by Krisztina Neglia

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The 5 Cs of Credit

Many first time buyers worry that they won't qualify for a mortgage. Maybe their income is too low, or they haven't saved a large down payment. In fact, lenders take into account a range of factors (known as the 5 Cs of credit) when deciding whether to offer you a mortgage.
Here is a look of each of the 5 Cs of credit and what they mean:
1. Capacity to repay: Your total household income is a strong influence of the amount of home you can afford to carry, and thus how capable you are of maintaining the payment schedule.

2. Character: Regardless of your salary, your employment history and your history of repaying debt (your credity history) are important signals of whether you can be relied upon to repay a mortgage.

3. Capital: The size of your down payment influences some of the other factors. A larger down payment lowers monthly mortgage costs and therefore requires less income to carry. A lower down payment may require additional guarantees, such as mortgage insurance.

4. Collateral: Since your mortgage is secured against the property, the lender will want to appraise the home's value to make sure it's in alignment with the amount of the loan. This is important to consider if you find yourself in a multiple offer situation and pay significantly higher than market value or if you waive the inspection and the home is seriously flawed.

5. Conditions: External factors such as the economy and markets influence how lenders set their terms and interest rates, which can affect both whether you qualify and the affordability of your monthly payments. Even if you are weaker in some of these areas, we can refer you to professional who will review your complete financial picture and show you how you might still qualify for a mortgage. 

Give us a call and ask how we can help you qualify for a mortgage!