Michigan Mortgage Lending Basics
What are Lenders looking for in Detroit, MichiganTo achieve the best possible mortgage deals you need to understand what a lender is looking for in a potential customer. While funds are more freely available now than they have been in the past, lenders are also more risk-averse and will rarely lend to people they consider a "poor risk" - Michigan lenders are no exception. When considering whether or not to lend, there are three primary considerations commonly used by banks: Credit Score, Equity/Security and Debt Servicing Capacity. |
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Credit Score establishes your past history with debt and making repayments. Good CS will help but isn't enough by itself as it's a historic measure and doesn't guarantee that your current situation reflects your previous one. Previous debt management behaviour is a good indicator of future performance, but isn't a guarantee.
Equity establishes whether or not the lender can reclaim their principle in the worst case event of a loan default. In the current climate this is more important that ever. Equity by itself is aslo not enough as it's really only a factor in the worst case sitution, which the lender is always wanting to avoid anyway. it's a safety net they'd rather not have to use.
Debt Servicing or Debt/Income ratio is the third slice of the pie and shows the lender whether you have the financial resources to service the loan. It's a key factor, but again it's not enough by itself as it only shows that you CAN pay the loan, not that you WILL. Your CS is a better indication of whether or not you will pay on time and in full, and if both of these measures are good then you have a decent shot.
