The 4 C’s Of Credit For A Mortgage

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CHARLOTTE – When one begins their home buying journey the most important preparation is a budget. Just as an individual has a budget, the banks/lending institutions set their own limitations, or budget, on how much they will lend to an individual. So, the question arises, how does the bank set that “budget,” of approval? The answer is the 4 C’s!

The four c’s are: capacity, capital, collateral, and credit.  This will allow one to do a quick analysis. Capacity is going to be what is the borrower’s capacity to take on a new monthly payment.  Usually, the calculation is going to all monthly payments/debts plus the new estimated mortgage payment, divided by the gross income.  As long as that number is 50% of less, there is a very good chance of approval.

Now what may drive Capacity to need to be higher or lower would-be capital.  Does one have the assets/funds to put a large down payment, small down payment, or no down payment at all? Next is collateral, which is simply the home itself and why an appraisal is ordered.  The financing body will want to make sure the collateral is in a safe/habitable condition, as well as worth the number of funds being asked for. Then lastly, credit is simply the scores provided from the 3 major credit bureaus.  The goal is to have a score above 600, but of course, the higher the better!

Feel free to use the tips above during your preparation process, but if you would like an expert opinion, please feel free to reach out anytime ( (704) 430-6138.

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Brandon Wolf
Brandon was born and raised in the Mint Hill area and graduated from Independence High School. He went on to play college baseball at Wingate University. Brandon met his wife at Independence HS, dated all through HS, college and got married right after college (they have a little boy due in September). Brandon has been a Mortgage Loan Officer, in Mint Hill, for over 7 years. "Mint Hill is more than the place I work, it's been my home. I grew up, played baseball, met my wife. I truly love helping people get mortgages in this town I have always called HOME" says Brandon.