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What do Mortgage Lenders look for?

written by: Robin L.•edited by: Jean Scheid•updated: 8/31/2009

Knowing what mortgage lenders are looking for can help buyers prepare prior to the application process. Find out what parts of your financial life will be under the microscope.

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    There are four main things mortgage lenders look for when determining whether to offer prospective home buyers a mortgage. They look at the assets, credit, income to debt ratio, and property of the person or persons applying for the mortgage.


    The lending institution will want to verify assets you already have. This shows them that you have the means to continue paying your mortgage even if something happens to your income temporarily. They don’t expect buyers to have enough to pay the entire mortgage but a nest egg looks good. If you don’t have any money saved, begin saving money before attempting to buy a home. This can help with the down payment and the mortgage application process.


    The credit score of anyone applying for the mortgage will be scrutinized. The credit score shows the mortgage lender how reliably the borrowers have repaid previously loans. It is also a way for the mortgage lender to see how much debt you currently have. If the credit of one or more members of the application is not good try repaying existing loans or making timely payments of existing loans to help improve each individual’s credit prior to applying for a mortgage.

    Income v. Debt aka Debt to Income Ratio

    Tax records for the previous several years will be required for anyone who will be included on the mortgage. They mortgage lender is looking for proof that the people they will be lending money to have been gainfully employed, which indicates to them future employment. In addition, they will look at the amount of debt you have each month and compare it to your monthly income to verify that you will be able to afford an additional debt burden.


    Finally, the mortgage lender will look at the property you want to buy. It will need to be appraised. The appraisal must show the home is equal to, and preferably more than, the amount of money they will be lending. This is necessary in case the property goes into foreclosure. If the property is worth less than the money they have lent, they will not be able to recoup their losses. If the property is appraised for less than the asking price, you may need to lower your bid.