Emphasize all eight Cs of loan approval

Want to convince a lender to shower a huge pile of cash on you—a total stranger? Then think about your loan profile the same way a lender does. In fact, not only lenders but sellers and potential investors/partners in your acquisitions evaluate each of the following criteria:

  • Consistency: Fast track or flake?
  • Character: Can the lender trust you?
  • Capacity: Will your income cover the payments?
  • Collateral: What loan-to-value ratio applies?
  • Credit record: Have you managed credit responsibly?
  • Cash reserves: Can you handle financial setbacks?
  • Compensating factors: What positives add to your borrower profile?
  • Competency: Can you effectively manage the property?

Among these eight Cs, credit score stands most important. Great credit can ease every other underwriting guideline. Without strong credit, mortgage lenders will require you to prove your other Cs more persuasively—or they will severely increase costs and impose less desirable terms. In other words, credit stands tall, but it doesn't stand alone. If you suffer blemishes (or stains), work to enhance the strength of the other Cs. Offset weak credit and you can lower your borrowing costs, increase your borrowing power, and turn a "not likely" into an "approved." So, before we look more closely at credit, let's review several of these other influential standards.

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