Character, how it relates to your mortgage application!
Character is one of the 5 Cs of credit. Tisha Findlay explains how lenders judge it: full disclosure, job stability and paying your bills on time.
What does character have to do with your mortgage? Believe it or not, it is one of the 5 Cs of credit. As mentioned in previous articles, the 5 Cs of credit are used by lenders to determine your creditworthiness. It is important to understand the components, as it will help you to assess your own situation.
Tell the whole story
Character is equally, if not more, important than all the other Cs. Determining character is based on facts, as well as a lender's subjective judgment or even a gut feeling. Character is strengthened, and the application process simplified, when all financial information is fully disclosed and reported accurately. When you neglect to tell the whole story, you are at risk of the lender retracting their offer. The reason being, you may no longer qualify, or they have lost that sense of trust. It makes it very difficult to extend money to someone who is misleading, as they could be hiding pertinent information. Banks want to lend to people who are responsible and keep commitments. Your reputation is an important factor, and past behaviours often predict how you will handle credit in the future.
Stability and payment history
The lender wants to see that there is reasonable job stability, which can forecast consistent earning potential. With job stability comes the ability to make your payments. Another factor that relates to character is whether you pay your bills on time. This shows responsibility towards your credit obligations and is a good way for a lender to determine how you will fulfill their requirements. Your credit report is an effective tool that aids in determining this component. Read my article on your credit score to learn more about your credit report.
Lenders will also review the length of time that you have lived at your current address. Again, this is an indicator of stability, and they typically like to see at least 2 years at the same residence. Perhaps they see that you are currently renting and move every few months. It could be assumed that you have not been paying rent at each property, therefore being forced to move often. Not always the case, however, it could have a negative impact if these "adventures" cannot be justified.
The moral of the story is to put yourself in the lender's position. Ask yourself whether you would be willing to lend you money. If the answer is no, then you have some work to do. You can get there. It will take some time and effort, but it is worth it in the end. If your answer is yes, congratulations, because you are positioning yourself nicely to move forward with your financial endeavours.
Originally published Apr 7, 2018. Rates, programs and rules mentioned reflect that time; for today's numbers see the rates page or ask Tisha.
