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Sign into your accountCommon Ground
September 18 2012
This is the second in a series of four articles from RPR. Read the first article here.
Question: What do the REALTOR® and the mortgage investor have in common?
Answer: The need for the proper and accurate valuation of properties.
In this post, I will explain how RPR tools and features created for REALTORS® to use with their clients and customers also support the transaction within the mortgage industry. To better understand this relationship, let us start with the basics of mortgage credit risk: the 3 "C"s of underwriting:
- Credit: Lenders examine a potential borrower's credit history to determine their likeliness to repay debt.
- Capacity: Lenders determine the stability of the consumer's income, their debt-to-income ratio, and if they have adequate reserves.
- Collateral: The determination of the loan-to-value ratio and the quality of the down payment (are funds borrowed? Seller-assisted gifts, etc.). This is also known as the borrower's "skin in the game." The lower the loan-to-value the less likely a borrower will walk away or default.