Definition
Compensating factors are positive strengths offsetting negative factors. A large down payment, substantial reserves, or strong employment history can offset a higher debt ratio or past credit issue. Underwriters evaluate the full picture, not just numbers.
Not sure where this fits?
Answer a few questions and we’ll open the path that fits, at the right step.
Find my pathAbout this term
Factors like large reserves, high down payment, or strong employment can offset higher debt ratios or credit issues.
Pro Tip
Document strong compensating factors clearly when submitting mortgage application.
Example
Bankruptcy offset by 30% down payment and significant liquid reserves.