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Unformatted text preview: en if some problems arise. Lenders also give some leeway in qualifying if borrowers have reserves to fall back on. Borrowers with good bank accounts or other assets also demonstrate that they live within their means, are conservative in financial affairs, and have the ability to accumulate and manage money. 1. Down payment – The amount of down payment heavily influences the borrower's desire to keep up loan payments. If you purchased a house for $100,000 and made a down payment of $50,000, you would do everything possible to maintain the payments. If it became impossible to keep up the payments, you would sell the house. One way or another, you would not let the lender take your house by foreclosure. You would protect your $50,000 investment. On the other hand, if you had purchased the same property with little or no down payment, you would not be as motivated to maintain the payments. If you ran into financial problems, it might be easy to talk yourself into letting the lender take back the property. If you have no money invested in the property, you really have nothing to lose except your credit rating. You could easily decide to let the lender foreclose. Lenders recognize the importance of the size of the down payment. As the down payment increases, the lender's risk decreases. The size of the down payment is one of the most important factors in determining whether a loan will be approved. No matter what the emotional need of the prospective buyers, many lenders look to see the underlying desire for homeowner– ship. LIABILITIES
In addition to the income and emotional reason for buying, the next item that needs to be discussed with prospective home–buyers is their debts and/or obligations. These
13-18 Licensing School for Appraisal, CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities 13: QUALIFYING THE BORROWER
debts and/or obligations can be divided into two types: long-term and short–term. Most investors are interested in only the long–term debts, for they can have a major effect on a borrower's ability to...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.
- Spring '10