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The 4 Cs of Qualifying for a Mortgage

Homeownership | May 7, 2014

Qualifying Mortgage

Thinking about buying a home but not sure whether you qualify for a mortgage? Consider the following facts.

What Do Lenders Look For?

Freddie Mac buys mortgages that meet our requirements from lenders – we don't make the loans. The lenders decide the standards they ultimately apply in making loans.

When deciding whether to make a loan, lenders evaluate the four Cs:

  • Capacity to pay back the loan. Lenders look at your income, employment history, savings, and monthly debt payments, such as credit card charges and other financial obligations, to make sure that you have the means to take on a mortgage comfortably.
  • Capital. Lenders consider your readily available money and savings plus investments, properties, and other assets that you could sell fairly quickly for cash. Having these reserves proves that you can manage your money and have funds, in addition to your income, to pay the mortgage.
  • Collateral. Lenders take into account the value of the property and other possessions that you're pledging as security against the loan.
  • Credit. Lenders check your credit score and history to assess your record of paying bills and other debts on time. (Even if you don't plan to buy a home now, it's always a good idea to build and maintain strong credit. Landlords often check it to make sure that you can pay the rent. It's also important if you want to apply for a mortgage or other credit line in the future, such as a student loan, car loan, or credit card.)

Want to Know More?

Visit About Homeownership for information, resources, and tools to help you gauge your options and understand what's involved in looking for, buying, and maintaining your own home.

Learn the truth about some homeownership myths that also might be keeping you out of the market.


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