What Lenders Evaluate


When you apply for a mortgage loan, the lender will often look at "the three Cs" to review your application. They want to ensure that you're a good risk and can be trusted to pay back the loan.

  • Capacity.
    Capacity is your current and future ability to make payments. Lenders will look at your income, employment history, savings, and monthly debt payments.
  • Collateral.
    The principal collateral for a loan typically is the proposed mortgaged property. In addition, if you have savings, land, property, or other valuable assets, they can be used to secure loans.
  • 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 slight weakness in another. For example, if you own a home (strong collateral), but your credit history contains several late payments (weaker credit), your slight credit weakness may not hurt your application.

Based on the type of mortgage you're interested in, lenders will obtain, or you will be asked to provide, some or all of the following financial documentation:

  • Credit report.
  • Pay stubs for the past 30 days.
  • W-2 forms for the past 2 years.
  • Information about long-term debt, like car loans, student loans, etc.
  • Recent statements from your checking, savings, mutual fund, or other accounts.
  • Tax returns for the past 2 years if you're self-employed.
  • Proof of any supplemental income.
  • Records of any past derogatory credit accounts that have since been paid off.
  • Records of child support or alimony.

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