The 3 C’s of Underwriting Mortgage Loans

Karyl Smithby Karyl Smith of Alcova Mortgage

Buying a home is the single largest purchase most people will make. It’s huge! For this reason, I prefer to meet with my clients up to a year ahead of purchasing. Why? If all is good, wonderful! We will begin the countdown of the timeline. If anything needs to be tweaked, then we have time to come up with a workable game plan.

There are 3 very important components involved in getting a mortgage loan approved.

They are:

  1. Credit – your credit score, any delinquencies, account status and account usage.
  2. Capacity – your debt ratios, monthly income compared to housing payment + other monthly debt
  3. Collateral – the property you are buying –the cost, what type it is, what is its primary use and how much you are putting down.

GREAT CREDIT SCORES GIVES HOMEBUYERS OPTIONS! What affects credit scores?

  •   How much revolving credit you have available to you versus how much revolving credit you are using. It’s best to keep debt to credit ration at 30% or lower. Example: Joe has a Visa credit card that has a high credit limit of $1000. He uses this card on a regular basis to pay for gas and groceries. His goal is to keep the balance of that Visa account at or under $300 each month.
  •   How many cards have balances? Eliminate the balance on some of the low balance cards and it will help increase scores. Once you have those small balances paid down to $0, keep card open. Never remove old debt that was paid well from your credit history.
  •   DO NOT be seen as a credit risk! Do not miss paymentsDon’t charge more than what is “the norm” for you Don’t take cash advances on your credit card

    These actions might signal a change in your finances that could be concerning to creditors. Other events that might affect your credit score:
    City fines
    Parking Tickets

Back Taxes
Unsettled Accounts such as Utilities
REMEMBER, GREAT CREDIT GIVES HOME BUYERS OPTIONS!