Mortgage Calculator CT (Connecticut)
Overview of Connecticut Housing Market 2023
The housing supply in Connecticut is still very low. In July 2023, there were only 7,870 homes for sale, down 47.2% from the same month last year. The average month of supply is 2 months, which is well below the 6-month level that is considered a balanced market. The housing supply is also expected to increase, but it will still be below the level that is considered a balanced market. Homes are still selling quickly, and you may need to be prepared to make an offer above the asking price.
At Brighton Bank, our commitment goes beyond just providing financial services. We believe in empowering our customers with the tools and resources they need to make informed decisions about their financial future. That's why we've put together this dedicated mortgage calculator landing page – to offer you a seamless, transparent, and personalized way to explore your home financing options.
What's on this page?
-Property Tax in Connecticut
-Closing Costs in Connecticut
-Housing Market in Connecticut
Mortgage Calculator CT (Connecticut)
How to Calculate a Mortgage Payment
Calculating a mortgage payment involves a few key components: the loan amount, interest rate, loan term, and the type of mortgage. The most common type of mortgage is a fixed-rate mortgage, where the interest rate remains constant throughout the loan term. Here's how to calculate your monthly mortgage payment: The formula to calculate the monthly mortgage payment is:
M = P * [r(1+r)^n] / [(1+r)^n - 1]
The Variables are as follows:
M is the monthly mortgage payment.
P is the principal loan amount.
r is the monthly interest rate (annual rate divided by 12 and converted to a decimal).
n is the number of monthly payments (loan term in years multiplied by 12).
How a Mortgage Calculator can help you.
The Mortgage Calculator CT (Connecticut) is a powerful tool designed to assist individuals in making well-informed decisions about their home financing options. This calculator provides a range of benefits:
Payment Estimation: Predict your monthly mortgage payments based on loan details, aiding budget planning.
Scenario Comparison: Testing different loan amounts, interest rates, and terms to understand their effects on payments.
Loan term: Choose 30 years for lower monthly payments but higher interest or 15 years for less interest with higher monthly payments.
Avoiding strain: Brighton Bank's calculator factors taxes, insurance, and mortgage costs for a clear monthly commitment view.
Down payment: Lower 3% down payments feasible, calculator assists in optimal initial investment.
Affordability Assessment: Determining how much house you can comfortably afford within your budget.
Interest Analysis: This shows the total interest paid over the loan's life, guiding decisions on loan terms and types.
Key Determinants of Your Mortgage Payment
At Brighton Bank, we understand that your mortgage payment is influenced by a range of factors. Here are the essential elements that contribute to shaping your mortgage payment:
Loan Amount and Interest Rate: The total amount you borrow and the interest rate applied directly impact your monthly payment. A higher loan amount or interest rate typically results in higher monthly payments, while a lower loan amount or interest rate leads to more manageable payments.
Loan Term and Type: The length of your loan term and whether it's a fixed-rate or adjustable-rate mortgage matters. Shorter terms often have higher monthly payments but lower overall interest costs. In contrast, longer terms may offer lower monthly payments but potentially higher interest expenses over time.
Property-Related Costs: Property taxes based on your home's value and location, along with homeowners insurance to safeguard your investment, are included in your monthly payment. We can help you estimate these costs accurately.
Down Payment and PMI: A larger down payment reduces your loan amount, potentially lowering your monthly payment. If your down payment is less than 20 percent, Private Mortgage Insurance (PMI) might apply, adding a cost to your payment until you gain sufficient equity.
Our team at Brighton Bank is committed to guiding you through these intricacies, ensuring you make informed decisions tailored to your financial aspirations. With our expertise, you can navigate these elements and secure a mortgage payment that suits your unique needs.
What you can do to lower your monthly payment
A mortgage constitutes a long-term financial arrangement aimed at funding a home purchase, necessitating both repayment of the principal amount and the regular settlement of interest to the lender. The monthly cost of a mortgage can vary significantly based on factors like property price, location, and the type of loan selected.
To assist you in curbing your monthly mortgage expenses and achieving savings, Brighton Bank offers insightful strategies:
Opt for a more budget-friendly home: Selecting a less expensive property translates to a reduced loan amount and subsequently lowers your monthly mortgage obligation.
Make a larger down payment: If you make a down payment of 20% or more, you won't have to pay private mortgage insurance (PMI). PMI is an extra insurance that lenders require if your down payment is less than 20%. It can add hundreds of dollars to your monthly mortgage payment.
Secure a lower interest rate: Engage in thorough research across different lenders to identify the most favorable interest rate, contributing to a decreased overall mortgage expense.
Adjust your loan term: Opting for a longer loan term results in more manageable monthly payments, though it leads to a higher cumulative interest payment over time.
How lenders decide how much you can afford to borrow
When considering your borrowing capacity, Brighton Bank takes into account several key factors to ensure a responsible and suitable lending decision. Here's how Brighton Bank determines your borrowing capacity:
Income Evaluation: Brighton Bank assesses your income stability and sources to gauge your ability to comfortably make repayments.
Debt-to-Income Ratio (DTI): The bank analyzes your existing debts in relation to your income to determine a borrowing amount that maintains a manageable debt load.
Credit History Check: Your credit score and history are reviewed to judge your creditworthiness and ensure that the borrowing terms align with your financial track record.
Down Payment & Affordability: Brighton Bank considers your down payment amount, overall property expenses, and the chosen loan type to ensure that the borrowing amount remains within your financial means.
Determining Your Affordable Home Budget in CT (Connecticut)
Determining your affordable home budget in Connecticut involves assessing your financial situation comprehensively. Begin by evaluating your income, savings, and existing debts to calculate your available funds. To ensure you can manage mortgage payments, lenders will also consider your DTI when qualifying you for a mortgage. A DTI of 36% or lower is considered ideal. Consider the down payment, typically 10% to 20% of the home's purchase price, as it affects both upfront costs and ongoing mortgage payments.
A young couple with a combined income of $100,000 and a debt-to-income ratio of 25%, are looking to buy a home in Connecticut. They initially wanted a 3-bedroom, 2-bathroom home in the suburbs of Hartford, but the median home price of $400,000 was out of their budget. They compromised and bought a 2-bedroom, 1-bathroom home in a quiet neighborhood for $350,000. Their monthly mortgage payment is now $1,200, and their total monthly housing costs are $1,700, which is still within their budget.
In addition to your mortgage payment, you will also need to factor in other expenses, such as property taxes, homeowners insurance, and utilities. These costs can vary depending on the location of the home and the size of the home. Be prepared to compromise on your wish list because you may not be able to find the perfect home at your desired price point.
By carefully considering all of these factors, you can determine your affordable home budget in Connecticut and make the best decision in acquiring a house.
Next Steps: What to Do After You Have Estimated Your Mortgage Payments
Following your estimation of mortgage payments, the journey towards homeownership unfolds with essential next steps guided by Brighton Bank.
Whether you're embarking on this path for the first time, considering refinancing, or managing credit challenges, Brighton Bank is here to offer invaluable support at every phase.
Compare Our Rates: Before making a commitment, it's crucial to explore and assess offers from various mortgage providers. Brighton Bank encourages you to compare our rates with others, ensuring you make an informed decision. For more details, you can also access information about mortgage rates tailored to your location.
Undecided? Rent or Buy: If you're still weighing the options between renting and buying a home, Brighton Bank provides the guidance you need to evaluate which choice best suits your unique circumstances and financial goals.
Expand Your Knowledge: Brighton Bank provides a comprehensive resource to help you expand your understanding of diverse mortgage options. Whether you're interested in reverse mortgages, VA home loans, or FHA home loans, Brighton Bank equips you with insights to select the mortgage type that aligns with your preferences and requirements.
Driven by elevated mortgage rates, Connecticut currently faces a shortage of homes in its inventory, dampening interest from both buyers and sellers. This limited supply poses challenges for those seeking to relocate within or into the state, reducing the array of choices available. This scarcity has also elevated the level of competition among buyers. On average, Connecticut homes transition from listing to pending status in just 8 days, a notable contrast to the 20-day national average for pending properties in the United States. This urgency is markedly different from the market conditions of three years ago.
Increase in home value for Connecticut cities between March 2022 and March 2023
To address the affordability hurdles faced by buyers, especially first-timers, in local markets, Connecticut has initiated a program that provides up to $50,000 to assist with down payments or closing costs. This program is specifically targeted towards individuals aiming to purchase homes in areas of high potential, encompassing Fairfield County, New Haven County, and the Greater Hartford area.
In July 2023, the Connecticut housing market witnessed an 8.4% increase in home prices when compared to the previous year, resulting in a median selling price of $430,300. Notably, the number of homes sold exhibited a decline of 27.9% year over year. Specifically, there were 3,393 homes sold in July of the current year, a significant drop from the 4,706 homes sold during the same period last year. The median duration that homes remained on the market decreased by 4 days in comparison to the previous year, with the median days on the market standing at 31 days.
What is the housing market like right now?
What does this mean?
Changes in home prices and how fast they're changing give us clues about how strong the housing market is and if homes are getting more or less affordable. Right now, the typical home in the United States costs $434,500.
Average Closing Cost in CT (Connecticut) Counties
When buying a home in Connecticut, it's crucial to consider not only the purchase price but also the closing costs associated with the transaction. Closing costs encompass a variety of fees and expenses that are typically paid at the closing of the real estate deal. These costs can vary significantly depending on the county in which you're purchasing the property.
Average closing costs are the fees and expenses that homebuyers and sellers typically incur during the process of closing a real estate transaction. These costs can vary widely depending on factors like location, property value, and the specific terms of the deal. On average, closing costs typically range from 2% to 5% of the home's purchase price. For a homebuyer, these costs can include expenses such as loan origination fees, appraisal fees, title insurance, property taxes, and attorney fees. Sellers, on the other hand, may be responsible for costs like real estate agent commissions, transfer taxes, and any outstanding liens or repairs required to close the sale.
The exact breakdown of closing costs can differ from one transaction to another, but certain fees are fairly standard across most real estate transactions. These can include lender fees, title insurance, and escrow fees. It's essential for both buyers and sellers to carefully review the estimated closing costs provided by their real estate professionals and lenders to have a clear understanding of the financial implications of the transaction. Homebuyers may also have the opportunity to negotiate some of these costs with the seller or lender, potentially reducing their financial burden during the closing process.
The average closing costs encompass a range of fees and expenses incurred when buying or selling a property, and they typically amount to a percentage of the home's purchase price. The specific costs can vary widely depending on various factors, and it's crucial for individuals involved in a real estate transaction to be aware of these costs and to review and negotiate them whenever possible. Understanding closing costs is a fundamental aspect of the homebuying or selling process and helps individuals budget effectively for the overall cost of their real estate transactions.
Average Property Tax in CT (Connecticut) Counties
Understanding average property taxes in different Connecticut counties is crucial for homeowners and investors. It helps assess affordability, make county comparisons, plan finances, and guide investment choices. This knowledge informs budgeting, decision-making, and potential returns on real estate investments.
This dataset provides valuable insights into the Connecticut real estate landscape, particularly regarding median home values and property tax burdens in different counties. It's evident that Fairfield County stands out with the highest median home value at $433,000, reflecting a relatively affluent housing market. However, residents of Fairfield County also shoulder a substantial property tax burden, with a median annual payment of $7,928 and an average effective property tax rate of 1.83%.
On the other end of the spectrum, Windham County boasts the lowest median home value at $210,300, potentially indicative of a more affordable housing market. Interestingly, despite the lower home values, Windham County residents benefit from a relatively lower property tax burden, with a median annual payment of $4,049 and an average effective property tax rate of 1.93%.
The significant variation in property tax rates across Connecticut's counties highlights the importance of considering both home values and property tax obligations when evaluating the affordability of homeownership in a specific area. Residents in counties with lower home values might find the overall cost of living more manageable due to lower property taxes, whereas those in counties with higher home values might experience higher property tax burdens. This data can serve as a valuable resource for individuals and families looking to make informed decisions about their housing choices in Connecticut, as it underscores the financial considerations associated with different counties within the state.
What Property Tax Exemptions Are Available in Connecticut?
Let's delve into four common property tax exemptions applicable in Connecticut:
Homestead Exemption. In Connecticut, homeowners who qualify for the homestead exemption will only pay property taxes on the assessed value of their home minus $100,000. The homestead exemption is applied to the assessed value of your home, which is the value of your home as determined by the local assessor.
Disabled Veterans Exemption. The disabled veteran's exemption reduces the assessed value of a home by $10,000 for homeowners who are veterans with a service-connected disability rating of 10% or more. The disabled veterans' exemption is a valuable tax break for homeowners who qualify for it. It can save homeowners thousands of dollars in property taxes each year.
Elderly Freeze. This exemption prevents the assessed value of a home from increasing more than 2% per year for homeowners who are 65 years of age or older or who are disabled.
Historic Property Exemption. The historic property exemption is a tax credit that is available to homeowners who own historic properties that are listed on the National Register of Historic Places or that are certified by the Connecticut Historic Preservation Trust.
Property Tax Landscape in Connecticut and Beyond
Property taxes are a major source of revenue for local governments in Connecticut. The property tax rate is determined by the local municipality, and it can vary depending on the assessed value of the property. The state budget can affect the property tax rate by increasing or decreasing the amount of funding that is available to local governments. For example, if the state budget cuts funding for local governments, the local governments may need to raise property taxes to make up for the lost revenue.
The assessed value is the value of the property as determined by the local assessor. The assessor typically uses a variety of factors to determine the assessed value, such as the size of the property, the location of the property, and the comparable sales of similar properties in the area. Property taxes are due on the first day of July each year. If you do not pay your property taxes by the due date, you will be charged interest and penalties.
The property tax landscape in Connecticut is constantly changing. In recent years, there have been a number of proposals to increase the property tax rate or eliminate some of the exemptions and deductions. It is important to stay up-to-date on the latest changes to property tax laws so that you can minimize your property tax liability.
Home insurance, also known as homeowners insurance or property insurance, is a type of insurance policy that provides financial protection to homeowners against various risks and perils that could damage or destroy their property. This insurance coverage helps homeowners recover financially in case of unexpected events that result in damage to their homes, or belongings, or liability for injuries or damages to others that occur on their property.
Coverage Types and Options
When it comes to protecting your most valuable asset, understanding your options is essential. Home insurance offers various types of coverage to ensure you're safeguarded against unexpected events. Here are some key coverage types:
Dwelling Coverage: This protects the structure of your home itself, including its foundation, walls, roof, and more.
Personal Property Coverage: Covers your belongings, such as furniture, electronics, and clothing, in case of damage or theft.
Liability Coverage: Offers financial coverage in the event someone gets hurt on your premises and you are deemed liable.
Additional Living Expenses: Helps with temporary housing and living expenses if your home becomes uninhabitable due to covered events.
Factors That Determine Coverage Needs for CT (Connecticut)
When considering homeowners insurance in Connecticut, there are several factors that will determine the coverage you need. These factors can vary from person to person, but it's important to understand them in order to make an informed decision about your policy. Here are some key factors to consider:
Location - The location of your home plays a significant role in determining your coverage needs. Connecticut exhibits varying risks across its regions, including coastal vulnerabilities, flood-prone zones, and high-crime neighborhoods. Coastal cities like Stamford and New London face threats from storm surges and coastal flooding during severe weather events. Inland areas like Hartford, while not coastal, can still experience flooding, particularly along the Connecticut River. High-crime neighborhoods are present in cities such as Hartford and Bridgeport. Prospective residents should research crime statistics, assess the need for flood insurance, and consider other factors like property values, emergency preparedness, and local services before choosing where to live in Connecticut, tailoring their decisions to their risk tolerance and lifestyle preferences.
Coastal Proximity - For homes located near the coast, there may be increased risks associated with hurricanes, storm surges, and coastal erosion. It's important to have coverage that protects your property from these potential threats.
Flood Zones - If your home is located within a flood zone, it's crucial to have flood insurance coverage, as standard homeowners insurance policies typically do not cover flood-related damages.
High-Crime Neighborhoods - Homes situated in areas with higher crime rates may require additional coverage for theft and vandalism. This can help protect your property and belongings in case of unfortunate events.
Dwelling Features - The specific features of your home, such as its age, size, construction materials, and overall condition, are crucial in determining coverage. Older homes might have different coverage needs due to potential structural issues or outdated electrical and plumbing systems. Similarly, if you have special features like a swimming pool, a detached garage, or a built-in fireplace, you'll need to ensure these are appropriately covered.
Property Value - The value of your property, including both the land and the physical structure, impacts the amount of coverage you need. It's important to have enough insurance to cover the cost of rebuilding your home if it's damaged or destroyed, which might be different from the market value of the property.
Personal Belongings - Your personal belongings, such as furniture, electronics, clothing, and other possessions, need to be covered against events like theft, fire, or other damage. You'll need to estimate the value of your belongings accurately to ensure you have sufficient coverage. It's a good idea to create a home inventory with detailed descriptions and estimated values of your possessions.
Tips for Lowering Your Homeowners Insurance Premiums for CT (Connecticut)
Homeowners in Connecticut are often looking for ways to save on their insurance premiums. Here are some helpful tips to lower your homeowner's insurance costs:
Explore Options: Don't just accept the initial quote you get. Make an effort to obtain and compare estimates from several insurance providers.
Increase Deductibles: Think about increasing your deductible if you can afford a larger upfront cost during a claim.
Combine Coverage: A lot of insurance firms provide discounts when you merge various policies, like home and car insurance. Inquire about the potential savings when obtaining quotes.
Improve Home Security: Installing smoke detectors, burglar alarms, deadbolt locks, and other security measures can reduce the risk of damage or theft, leading to lower premiums. Be sure to inform your insurer once you have implemented these security features.
Maintain Good Credit: In many states, including Connecticut, insurance companies can use your credit score to determine your premiums. Keeping a strong credit rating can assist in reducing your insurance premiums.
Stay Claims-Free: Building a claims-free history can often lead to discounts on your premiums. Avoid making smaller claims and save your insurance for significant losses.
By implementing these tips, homeowners in Connecticut can potentially enjoy significant savings on their homeowner's insurance premiums while maintaining adequate coverage.
Trends in Homeowners Insurance Rates for CT (Connecticut)
Homeowners insurance rates can fluctuate over time due to various factors. Staying informed about the trends in homeowners insurance rates helps homeowners in Connecticut make educated decisions regarding their policies. Here are some recent trends worth considering:
Increasing Material and Labor Costs: The cost of building materials and labor can impact homeowners insurance rates. In recent years, the rising prices of construction materials and the demand for skilled labor have contributed to an increase in insurance premiums.
Climate Change Impact: Climate change can result in an increase in severe weather events, including hurricanes, storms, and floods. These events can cause significant property damage and result in insurance companies adjusting their rates accordingly.
Technological Advances: Advancements in technology have led to improved methods of assessing risks and deciding insurance premiums. Insurance companies are increasingly leveraging data and analytics to determine rates, resulting in more accurate pricing based on individual risk profiles.
Market Competition: The competitive landscape among insurance companies in Connecticut can influence rates. When multiple insurers compete for customers, it can lead to more competitive pricing and potential savings for homeowners.
Legislative Changes: Changes in local or state laws can also impact homeowners insurance rates. It's important to stay informed about any regulatory changes that may affect your premiums.
Keeping an eye on these trends helps homeowners in Connecticut understand the factors driving insurance rates and make informed decisions when purchasing or renewing their policies.
Average Homeowners Insurance Costs for CT (Connecticut)
Understanding the average homeowners insurance costs in Connecticut provides homeowners with a benchmark for comparison. While individual premiums can vary based on numerous factors, here is an overview of the average costs in the state:
In August 2023, the average yearly cost of homeowners insurance in Connecticut is $1,329, amounting to $111 per month. This cost is notably 24% less than the national average expenditure of $1,754 per year.
This average cost, however, can vary depending on the factors discussed previously, such as location, dwelling features, property value, and personal belongings.
Coastal properties or areas prone to flooding may experience higher premiums due to increased risks.
It's important to note that this average cost is for a standard homeowners insurance policy and does not include any additional coverages or endorsements.
Homeowners should request personalized quotes from insurance companies to obtain accurate estimates based on their specific circumstances.
By understanding the average homeowners insurance costs in Connecticut, homeowners can better budget for their insurance expenses and ensure they have appropriate coverage without overpaying.
Connecticut State Average Insurance Premiums by Dwelling Limit
The data provided highlight the progressive nature of property taxes in the state, where homeowners with higher-valued properties bear a larger share of the tax burden. For example, a homeowner with a property valued at $250,000 pays an estimated $1,570.51 in property taxes annually. As the property value increases, so does the annual tax obligation. This progressive taxation system reflects the principle that those who own more valuable properties, which often come with greater access to local amenities and services, should contribute proportionally more to fund those resources.
Connecticut, like many other states, relies significantly on property taxes to finance essential services such as schools, public safety, road maintenance, and community initiatives. This funding model allows local governments to maintain and enhance the quality of life for their residents.
However, it's important to recognize that property tax rates and assessments can vary by town or municipality within Connecticut. Local governments have some autonomy in setting their own tax rates, which can result in variations in property tax liabilities for homeowners depending on where they reside.
As such, prospective homebuyers and current homeowners in Connecticut should carefully consider property taxes as a critical component of their housing expenses. Property tax costs can significantly affect the affordability of homeownership and should be factored into financial planning and budgeting decisions when buying or owning property in the state.
Mortgage Resources in CT (Connecticut)
Mortgage resources refer to various tools, information, and support available to individuals seeking to obtain or manage a mortgage loan. Mortgage resources are valuable for both first-time homebuyers and existing homeowners looking to refinance or better understand their mortgage options.
Brighton Bank Mortgage Services
Are you looking for reliable mortgage services in Connecticut? Look no further than Brighton Bank! We are dedicated to helping you achieve your homeownership dreams with our range of mortgage solutions tailored to meet your unique needs. Whether you're a first-time homebuyer or a seasoned real estate investor, Brighton Bank is here to assist you every step of the way.
Why Choose Brighton Bank for Your Mortgage Needs?
1. Personalized Service: Our team of experienced mortgage experts will work closely with you to understand your financial goals and find the right mortgage product that fits your budget and lifestyle.
2. Competitive Rates: We offer competitive interest rates and loan terms to help you save money over the life of your loan. Our goal is to make homeownership affordable for you.
3. Simple Pre-Approval Process: Getting started on your homeownership journey is easy with Brighton Bank. You can kickstart the pre-approval process today with just a few simple steps.
Start Your Homebuying Journey with Brighton Bank
Ready to take the first step towards homeownership in Connecticut? Click the button below to begin the pre-approval process with Brighton Bank. Our team is excited to work with you and help you achieve your homeownership dreams!
Local Economic Factors in CT (Connecticut)
Beyond your mortgage payment, it's essential to consider the local economic factors that can impact your financial stability and property value in Connecticut:
Employment Opportunities: The availability of jobs and the health of local industries play a role in your financial security and ability to meet mortgage payments.
Market Trends: Real estate markets can experience fluctuations in prices. Our team can provide you with insights into current market trends to assist in your decision-making.
Infrastructure and Development: Development projects, transportation networks, and infrastructure improvements can affect the desirability and value of properties in certain areas.
Property Value Trends: Understanding how property values have changed over time can give you a sense of the potential appreciation of your investment.
Using a mortgage calculator is a simple and efficient way to estimate your monthly mortgage payment. By entering essential details like the loan amount, interest rate, and duration of the loan, you can swiftly determine your monthly payments. It's crucial to note:
Loan Amount (Principal): This is the total amount of money you're borrowing to purchase the property.
Interest Rate: This is the annual interest rate on the loan. Make sure to convert this to a decimal by dividing it by 100.
Loan Term: The loan term is the number of years you have to repay the loan. It's usually expressed in years. Typical loan terms are 15, 20, or 30 years. A longer-term typically results in lower monthly payments but more interest paid over time.
Down Payment: The down payment is the initial amount of money you contribute toward the purchase price of the home. It's usually a percentage of the home's price, and a larger down payment can result in lower monthly payments.
Amortization: Amortization is the process of gradually paying off your mortgage over time through regular monthly payments. Early on, a larger portion of your payment goes toward interest, while later in the loan term, a larger portion goes toward paying down the principal.
Closing Costs: These are the fees associated with finalizing the mortgage and completing the home purchase. They can include things like appraisal fees, attorney fees, title insurance, and more.
Housing Market: The housing market refers to the buying and selling of residential properties. It includes all the activities and transactions related to homes, apartments, and other types of housing.
Mortgage: A mortgage refers to a loan acquired to buy a home, where the property acts as security for the borrowed amount.
Private Mortgage Insurance (PMI): A type of insurance that is often required by lenders when a borrower puts down less than 20% of the home's purchase price as a down payment. It's commonly used to mitigate the increased risk associated with lower down payments.
Debt-to-Income Ratio: A financial metric used by lenders to assess a borrower's ability to manage their debt payments in relation to their income. The DTI ratio helps lenders evaluate the borrower's financial stability and the likelihood of repaying the loan.