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Five C's for Mastering the Mortgage Maze

May 18, 2016
Mauro Harto
Mauro Harto

Have you ever wondered how mortgage lenders determine whether to approve or decline a mortgage application? Here are five “C’s” that lenders use to evaluate – or underwrite – your mortgage application.



This is the borrower’s ability to repay the loan. Lenders will consider a borrower’s monthly expenses (debts such as credit cards, car loan, student loans, rent, etc.) in comparison to their monthly income. This information is used to determine the borrower’s Housing Ratio and Total Debt Ratio.

The Housing Ratio is the Proposed House Payment ÷ Monthly Gross Income. The Total Debt Ratio is Total Monthly Expenses (including proposed house payment) ÷ Monthly Gross Income. Individual situations can vary, but a general rule of thumb is that your mortgage payment should not be more than 28 percent of your monthly take-home pay, and your total debt obligations should be 36 percent or less of your monthly take-home pay.


Lenders will review borrowers’ credit history. The credit report provides a snapshot of how borrowers manage their expenses given their monthly income resources. The number of recent credit inquiry requests is also considered when viewing the credit profile.


Capital is the amount of money borrowers have available for down payment and closing costs. Documentation of the resources that will be used to purchase a home will be reviewed by the lender to determine if there are sufficient funds to close the loan. These sources will be verified during the application process and prior to the loan closing.


Collateral is the property that will secure the mortgage loan. Your lender will order an appraisal of the property to determine the market value. The appraisal report also provides information about the type of property, the condition of the property, and whether or not repairs will be required. Appraisals are performed by independent third parties.


Comparing loan products can help you match your financial plan with your monthly budget. There are various types of mortgage loan products that have different down payment requirements, including FHA, VA, USDA Rural Development or Conventional. Your mortgage lender can help you determine which loan will best fit your financial objectives. Your lender can also determine your eligibility for down payment or closing cost assistance programs.


If you’re thinking of buying a home, understanding the “C’s” will help you prepare for the mortgage application, underwriting and approval process. You can depend on your Hancock Bank or Whitney Bank mortgage lending professional to guide you every step of the way as you navigate the mortgage maze. Locate a mortgage loan originator and get pre-qualified today!

Whitney Bank uses these trade names: Hancock, Hancock Bank and Whitney. 

Whitney Bank, Member FDIC and EHL_Bug_Actual_Size.jpgEqual Housing Lender. All loans and accounts subject to credit approval. Terms and conditions apply.

This information is for educational and illustrative purposes only.