3 Pieces of Information a Lender Uses to Make a Loan Decision

If you are applying for a mortgage loan, you may wonder what pieces of information a lender looks at when determining if you qualify. There are many factors that affect your ability to get a loan, but there are three that are extremely important. Here are 3 key pieces of information that a lender looks at when deciding whether you qualify for a mortgage loan.

Your Income

The amount of money you make has a huge impact on whether a lender approves you for a loan, and if so, how much you get approved for. Most lenders will look at the last two years of your income. But they may make exceptions if you are self-employed or if you have recently taken on a job that pays significantly more. Be prepared to show current pay stubs and two years of tax returns. Also expect the lender to verify your employment and salary with your employer.

Credit History

Another factor that a lender will look at when you apply for a mortgage loan is your credit history. Your credit report provides the lender with a great deal of history. Here are just a few of the things it tells a lender:
It allows them to see how much debt you have. If your debt-to-income ratio is too high, you may not qualify for a loan.
It tells the lender how often you are late paying your bills. Lenders want their money on time, so if you have a history of paying your bills late, it could be a problem.
It allows them to see whether you pay your bills. If you have delinquent accounts, you may automatically be disqualified for a loan. This is because the likelihood of a lender getting stiffed greatly increases if you have failed to pay other lenders in the past.

Property Information

The last bit of information a lender will look at is information about the property itself. The lender will carefully look at the value of the property and determine if it is worth lending you money for. If you default on your payments, the bank will foreclose on the home and sell it to someone else. It doesn’t make sense for them to lend you more than the home is worth. Otherwise they could get stuck with an underwater investment if you fail to pay the bills.