Credit Risk Evaluator
When applying for a mortgage loan, there are 3 main factors that determine your borrowing risk. These are Credit History, Equity/Down Payment, and Debt to Income Ratio. The risk that best represents you and your particular situation will determine how much money you can borrow, the interest rate you get, and the amount of any costs associated with your offer.
Credit History
The chart below gives you a breakdown of the range of credit scores and how they are interpreted:
| Your credit Score: | Rating: |
| 720-850 | Extreme Low Risk |
| 660-719 | Low Risk |
| 620-659 | Moderate Risk |
| 580-619 | Slightly High Risk |
| 500-579 | High Risk |
| Below 500 | Extreme High Risk |
Equity/ Loan to Value (LTV) Ratio
Loan to value is the loan amount divided by the appraised value of the home. The more equity in the home (or larger down payment), the less risk it is for the lender. Along with your credit score, the LTV ratio is critical for the lender to determine your overall risk level.
| Loan to Value Ratio: | Risk Level: |
| 0-65% | Extreme Low Risk |
| 66-75% | Low Risk |
| 76-80% | Moderate Risk |
| 81-90% | High Risk |
| Above 90% | Extreme High Risk |
Income Level/ Debt to Income Ratio
Your income level determines how much you can qualify for and which loans you can be approved for. Even more important is your "Debt to Income Ratio". This is the amount of your total monthly debt divided by your combined gross monthly income. Along with your credit score and LTV ratio, this number plays an important role in determining your overall risk level.
| Debt to Income Ratio: | Risk Level: |
| 0-33% | Low Risk |
| 34-39% | Moderate Risk |
| 40-50% | Considerable Risk |
| Over 50% | Extreme High Risk |
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