Capital, Capacity, Collateral, Credit, Character

The 5 C's of credit are lending guidelines banks and lenders consider when reviewing potential files.

CapitalCapital is referring to how much of your own money are have to put towards the purchase of a home. Typically, in the form of a down payment. Check out our minimum down payment article to learn more.

Capacity Capacity is referring to a borrower’s ability to cashflow a mortgage payment. This is where we look at ratios and household debts comparative to income.

Collateral Collateral is referring to the property the lender is lending on and any other assets a borrower has, to help support a lender’s decision in loaning the money. If a borrower defaults on a mortgage, the lender wants to know there is assurance and protection the loan can be paid.

Credit Credit is referring to your history with making repayments and creditworthiness. Your credit score will show the lender your history and patterns with managing debt and how successfully you have handled it. Credit scores can determine if a lender will or will not lend to you, how much they will lend and what interest rate you will receive.

Character Character is touching on all the previous 4 C’s. It is reviewing the borrower as a whole and looking at everything. Employment, creditworthiness, savings, existing payments ect. As a broker when submitting a file for an approval, we like to tell a story about who the client is. If you have good character, a lender will be more willing to give you a mortgage.