What Do Lenders Look for When Approving Your Mortgage Loan?

by Jonie Civill 10/13/2019

If you are looking to get a new loan, especially for a mortgage, a bank or your lending institution will review and approve or decline your application based on the information you provide.

That said, there is certain information that prospective lenders consider carefully when they examine your application for a home loan. This article is all about that data and the steps you can take to support your loan application as well as realize your dream of owning a house.

Here is the critical information your lender looks out for when reviewing your loan application.

1. Your Credit Score 

The number one place your lender will set their eyes on is your credit score no matter the channel you are coming from, either in person or online. This is a general rule of the thumb: if your credit score is high, you stand a better chance. Alternatively, if you have a low credit score, you will need to crack some hard nuts. So, you should give a critical look into your credit before taking the first step.

However, your credit score is just the first step. It could disqualify you immediately, but only a few banks will approve a new loan with a good credit score alone. If your bank disqualifies you based on your low credit score, do not panic as there are many other avenues to loan approval.

2. Your Payment History

If you pass step 1, now the real analysis begins. The first step after checking the credit score is to look at your complete credit history. Many banks have a system for underwriting loans using old school paper printouts. They would print your credit report for the loan file and would manually check it with a highlighter. They would select any late payments and mark them up to look for a pattern.

So, 90-day late payments are massive issues, although 30- or 60-day late payments may be pardonable. A pattern of late payments is enough to disqualify a loan application, even if you meet credit score requirements.

3. Your Ability to Repay Past Loans

When you pass steps 1 and 2, the banks will eventually shift their focus to your outstanding debt, income, and ability to repay the loan. By reviewing your complete credit report, they can determine if you have been responsible for past loans and possess the habits of making on-time payments. 

Final Thought

There are many erroneous beliefs out there about how mortgage loans are approved. You need to show both that you have the income to support the loan and a history of responsible and on-time payments. Lacking one or the other can stop your mortgage application right in its tracks.

About the Author
Author

Jonie Civill

With over 30 years of residential experience in the Capital District, I have an in depth knowledge of houses for sale throughout the region. Working with buyers, I listen to your needs and help you find the right home. Selling a home requires a professional understanding of the process, including pricing, staging and personalized marketing techniques to get your home sold. I will work with you through all the details of buying or selling right through till the closing.

I have been a Multi-Million Dollar Producer throughout my career. I am active in the Greater Capital Association of Realtors serving on the Professional Standards and the Community Outreach Committees.

My business has been based on repeat and referral clients, which is the highest compliment I can receive. I have sold some homes 3 times and have worked with 3 generations of a family.

I believe in paying it forward. For years I have been actively involved with community service organizations.

Real estate has been my job but I really enjoy helping others create a better quality of life for themselves