1. Credit Score
Your credit score is one of the first things lenders will check. It helps them determine your reliability as a borrower. Higher credit scores often mean better loan terms and lower interest rates, so it’s important to regularly check and improve your score before applying.
2. Employment History
Lenders want to see a steady employment history, as this demonstrates financial stability. Expect to provide details about your job, salary, and how long you’ve been employed. A steady income reassures lenders that you can handle mortgage payments.
3. Debt-to-Income Ratio (DTI)
Your DTI ratio is a key indicator of how much debt you’re already managing compared to your income. A lower DTI ratio is favorable, as it indicates you have enough income to afford a mortgage in addition to your current obligations. Lenders typically look for a DTI under 43%.
4. Down Payment
The size of your down payment impacts the lender’s decision. A larger down payment reduces the lender's risk because it means you’re investing more of your own money into the property. A down payment of at least 20% is often recommended to avoid paying Private Mortgage Insurance (PMI).
5. Savings and Assets
Lenders like to see that you have a buffer of savings and assets, as this shows you can handle unexpected costs. Your savings account balance, investments, and any other assets help demonstrate your financial responsibility and readiness for homeownership.
6. Property Appraisal
Lenders will require an appraisal of the property to ensure it’s worth the price you’re paying. This protects the lender by confirming that the home’s value justifies the loan amount. The appraisal results will directly impact your mortgage approval process.
7. Loan Type and Terms
Different loan types have varying requirements. For example, conventional loans may require higher credit scores and down payments than government-backed loans like FHA or VA loans. Lenders will review the type of loan you’re applying for and its terms before approving your mortgage.
8. Previous Mortgage or Rental History
If you’ve previously had a mortgage, lenders will want to see how well you’ve managed those payments. A solid history of making mortgage payments on time will strengthen your application. If you’ve rented in the past, lenders may look for proof of regular rent payments as an indication of your ability to meet financial obligations.
9. Property Location
The location of the property can influence the lender’s decision. Lenders typically prefer properties in stable, well-established areas. If the property is in a less desirable location, it may be considered a higher risk for the lender.
10. Loan Pre-Approval
Getting pre-approved for a loan can speed up the process and help you understand your budget before applying for a mortgage. Lenders look favorably on borrowers who have taken the initiative to get pre-approved, as it indicates readiness and seriousness in the home buying process.
Manage Your Mortgage and Financial Goals with Life Planner
Now that you know what lenders look for, it’s important to keep track of your financial situation to improve your chances of approval. With the Life Planner app, you can manage your budget, track your savings, monitor your credit score, and even track your mortgage payments. Life Planner’s Loan Tracking and Amortization tools allow you to stay on top of your mortgage, while its Financial Reports provide valuable insights into your spending habits.
Take Control of Your Financial Future
Ready to take charge of your home buying journey? Make sure you’re financially prepared by using the Life Planner app. With tools to track loans, set savings goals, and more, you can stay ahead of your mortgage application and improve your financial well-being.
Download the Life Planner app today and take the first step towards homeownership:
- For Android: Google Play
- For iOS: App Store
Don’t wait – download Life Planner and start preparing for your mortgage application today!