The Five C's of Credit

When we help a client obtain mortgage financing, we need to look into your overall credit risk. We seek out clients that demonstrate a history of strength and stability with respect to the Five Cs of Credit. This is done for your protection – to ensure that you don’t obtain financing that you will have difficulty repaying – as well as the protection of our lender partners.

1. Character

• Will you be willing to repay the loan?
• Do you have a sense of responsibility for your obligations?
• How has this sense of responsibility been demonstrated?

2. Capacity

• Will you be able to repay the loan?
• What are your financial circumstances?
• Have you thought about or reviewed your budget to determine your ability to repay the loan?
• Are sources other than employment income depended upon to make these payments, and are these sources stable?

3. Collateral (such as a down payment or equity)

• Collateral may make the loan safe, but not necessarily sound.
• Provides incentive for you to repay the loan.
• Provides a means of at least partial recovery if a loan defaults.
• Collateral should not be considered as a source of repayment.

4. Capital

• Do you have a cushion for repayment in the event of a financial setback?
• Indicates an ability and willingness to save and accumulate assets.
• Confirms that you manage your financial affairs adequately and within your income.
• Lack of accumulated worth could be a danger signal unless you are fairly young.

5. Credit

• What are your past habits when paying back other forms of credit?
• Provides a record of your past credit experience.
• If there is a problem, a full and satisfactory explanation should be received.