Am I Qualified to Qualify?
Often times I am asked,
“Shima, how do I get qualified? What are the requirements? Is it easy?”
In order to better assist all my friends & clients, I’ve asked lender, Pooyan Fard to share below the basics.
Hope you find it helpful and if you have any other questions, don’t hesitate to send me an email and I will gladly answer any questions you may further have.
What are the basic requirements?
When it comes to loan applications, it really matters to know what is going to make a difference. As most of other things in this blessed country there is no limitation for who can apply for a loan but to actually get the loan it really helps to know what is needed as the basic requirements. Gone are those days that one could get a mortgage for X amount without the lender verifying his/her ability to repay and in order to make sure the are no more malpractices in mortgage lending, very strict rules and regulations are in place. Here I briefly explain the 4 basic requirements that lenders are supposed to verify when granting a loan and the term we use in mortgage industry is the 4 Cs. It stands for; Character, Credit, Capital, and Collateral. In the next section I will briefly explain the 4 Cs.
What are the 4 Cs?
The first C, Character refers to the character of the individual borrowing the money and it will be a very important factor in determining whether the person is going to repay the loan as the payments will fall due. The lenders will use their due diligence to make sure they are going to lend money to the borrowers who are responsible and reliable.
The second C refers to the borrower’s credit. Theoretically, according to FHA guidelines one can get a loan with a credit score as low as 500 but practically the minimum required score is generally 620.
The third C refers to capital which is the amount of liquid asset the borrower has to prove the borrower has some fair amount of savings that can be used for different purposes such as down payment, reserves or impounds and also the cost involved for the transaction. Therefore the liquid assets like the money that borrowers have in their bank accounts or stock or investment accounts play an important role in the decision made by the lenders.
The last but not least C refers to collateral. For residential loans always a collateral is required and it would be the property for which the borrowers are getting the loan. That is why there is always an appraisal needed for the residential loans. The appraisal helps the lender to verify that the property is at least worth as much as sales asked price and then according to the value the loans will be granted. This way in case the borrower defaults on the loan the lender is confident they can get the money they have invested in the property back by taking over the property.
For further questions, please contact Pooyan Fard.
