|This guide was designed to help you assess your possible credit rating and what type of terms you can expect from a lender. Please keep in mind this is only a general guide as some lenders place different grades based upon their own method of evaluation.The following main factors determine your Credit Grade:|
The credit is broken into three primary categories:Debt Ratio
Besides credit considerations, lenders review the capacity of the borrowers to repay the Kentucky mortgage obligation.Max LTV
Loan-to-Value Ratio, or LTV as it is commonly referred to, is the ratio of loan amount to the appraised value (or the sales price, whichever is less) of a property. For example, a loan of $100,000 on a property valued at $200,000 is at an LTV of 50%. The higher the LTV, the stringent the lenders become on credit and debt ratio. The A borrower can get 100% LTV loan and in some cases even 125%. For the D borrower maximum loan-to-value ratio averages 65-75%.Credit Score
Kentucky Mortgage lenders and other creditors frequently use credit scores, known as FICO scores, to determine the credit risk. The higher the credit score, the better the credit risk.The interest rate a lender will charge depends on these four main factors. If all the factors are great, the loan is assigned A grade and therefore qualifies for the best interest rate. If even one of the factor is not up to par, the quality of the loan is downgraded to A-, B, C, or D paper. D papers refers to what is known as hard money loans which are mostly based on the equity in your home and not on your credit. A lender who is making a B, C or D paper loan is taking a higher risk since there is an increased likelihood of the loan defaulting. The lender is compensated for higher risk by charging the borrower a higher interest rate:
A- papers could have rates 1% - 1.75% higher than A papersThe interest rates quoted for A-, B, C or D papers, like for adjustable programs, could vary vastly from lender to lender.
Below are typical of the requirements used by many lenders, but are not absolute grades - lenders typically have similar but somewhat different specifications.
Please note that the figures shown here are general guidelines and may vary from lender to lender. Exceptions are always possible with strong compensating factors that reflect low credit risk. Some compensating factors are history of savings, long-term job stability, history of making monthly credit payments that equal or exceed the proposed payments, a substantial down payment or a large cash reserve after the close of escrow.Note: If you plan on shopping around for a mortgage we advise that you take the time to order your credit report from all three credit reporting agencies and check it for errors. The 3 major credit reporting agencies are:Equifax, TransUnion, and Experian.