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Jul 20
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When you apply for a mortgage, the mortgage lender will evaluate your application based on these four factors, capacity, capital, collateral and credit.When you meet them for face to face interview the questions will revolve around these four factors. Your ability to answer the questions in a satisfactory manner will determine whether your mortgage loan application is approved
What Mortgage Lenders Evaluate
This four factors are well explained by the following article that was originally published at Freddie Mac Website
Capacity
Capacity is your current and future ability to make payments. Lenders will look at your income, employment history, savings, and monthly debt payments.
Capital
Capital, or cash reserves, refers to the reserves of money and savings, investments, properties and other assets that belong to an individual and that can be sold relatively quickly for necessary cash.
Lenders will evaluate your application more favorably if you can verify that you have cash reserves. Cash reserves show the lender that you can manage your money well and that you can count on other funds, in addition to your income, to pay the debt.
Collateral
The lender will take a look at all your possessions and property that you can pledge as security for debt.
Credit
Lenders look at your credit and on-time payment history to see your record of paying bills and debts.
Lenders will ask for financial statements to see if you meet all of their criteria. Sometimes your strength in one area can cancel out your weakness in another.