Palm State Mortgage helps with your 5 c's of Credit! Although we have given this blog its own title, it is really Part Two of the Creditworthy article published in our previous blog.  In that blog, Palm State Mortgage Company introduced you to the famous Five C’s Of Credit.

The 5 C’s of Credit are the tell-tale ways lenders obtain a financial picture of the risk involved in giving you the money for your home loan.

They add up to more than your credit score and bring you the status of creditworthy.  They are your true credit “swag,” in today’s jargon and they are more than just your credit score.

What Are The Five C’s of Credit?

The Five C’s are:  Cash Flow, Collateral, Capital, Character and Conditions.  Please read or review last week’s article to learn about the first two, Character and Cash Flow.

This week we will focus on the final three of the five:  Collateral, Capital, and Conditions.

We introduced the Creditworthy Question, “What do Lenders Want?”  In order to understand all the details of your creditworthy status in the eyes of lenders, we now continue with the Five C’s of Credit.

The Third Creditworthy “C” of the Five C’s of Credit:  Collateral.

Lenders are concerned with collateral when you are applying for secured loans.  By the way, unsecured loans, like credit cards do not require collateral.Palm State Mortgage Company reminds you to polish your credit score.

Palm State wants you to understand that your home mortgage will be what is called a secured loan.

This means that to be creditworthy in the lender’s opinion, you promise something you own as a hostage to the fact you can re-pay the loan.  That is your collateral.

“The value of your collateral will be evaluated and any existing debt secured by that collateral will be subtracted from the value. The remaining equity will play a factor in the lending decision.”

For more information on Collateral and more details on the Five “C”s, we suggest you visit this reliable online resource.

To put it simply, the lender “wants to be comfortable that it will be able to recover its loan by liquidating the collateral and using the proceeds to pay off the loan.”

The Fourth Creditworthy “C” in the Five C’s of Credit: Capital

Palm State Mortgage wants you to know that, although household income will be considered your primary resource of repaying your loan, capital includes:

  • Savings
  • Investments
  • Other Assets

Taken together with your household income, these financial assets prove you have other worth in addition to your employment.  After all, lenders are bound to wonder, what happens to your paying ability if you lose your job?

The Fifth Creditworthy “C” in the Five C’s of Credit: Conditions

Lenders want to know the details of your purchase, but they also are mindful of other factors when they consider your loan.  For example, they have to consider the big picture of the economic conditions.  Environmental issues at the time might also figure into their assessment of your creditworthiness.  Likewise, they will study the math, basically, the interest rates and the principle involved in the transaction.

The Five C’s of Credit and your Credit Worthiness:  A Quick-View Summary

Now, let’s summarize the five C’s:

1.  The First “C” of the Five Credit “C”s is character, which refers to a borrower’s reputation.  So, brush up your credit scores, and restrain yourself from purchasing any big ticket credit-involved items while you are getting a home loan.

2.  The Second “C” of the Five Credit “C”s is Capacity.  Briefly it means your ability to repay a loan in the face of your current debts.

3.  The Third “C” of the Five Credit “C”s is capital and if you have a lot of it, your lender will see it as lessening the chance you might default on the loan.

4.  The Fourth “C” of the Five Credit “C”s refers to your collateral, which you put up as hostage for the loan.

5.  The Fifth “C” of the Five Credit “C”s refers to the conditions of the loan.  The interest rate and the amount of principle will figure strongly in this factor.  The conditions of the loan will help empower the lender’s desire to give you financing.  If you want to learn more about the Five “C”s of Credit, visit each of them at this convenient resource.

Happy Halloween!  At Palm State Mortgage Company, we work loan magic for your home!

Thank you for visiting Palm State Mortgage Company this week,

and we hope you are planning a happy, safe and fun Halloween!

At Palm State Mortgage, we know home loans do not happen by magic, but with a little planning,

and using the five C’s of Credit, we can help you prove your creditworthiness.