Mortgage approval: What's your ability to borrow?

Before you hunt for the home or even apply for the loan, you should evaluate your borrowing capacity. And that means looking at a surprising number of factors.


This section:

  • Explains what factors affect your chances for loan approval

  • Describes how your borrowing capacity is decided

  • Helps you choose a responsibly sized mortgage

On this page we'll examine how your credit history affects your mortgage approval. On the next two pages we'll take a look at your credit capacity and how lenders will look at the mortgage collateral.

The second part of this guide examines the rest of the decisions you'll have to make when choosing your mortgage. Refer to the table of contents if you're looking for specific information.

How your profile affects your chances for approval

Sometimes, even if you're sure you've found the perfect mortgage package for your needs and you've dotted the i's and crossed the t's on the application, the lender simply says no.

What do lenders consider when they make that decision? They look long and hard at the mortgage you want and the personal profile you present. What lenders see in you is just as important as what you're looking for from them.

Lenders look at the specific combination of facts about you and your desired mortgage when they make their loan decisions. The three most important things to a lender are your credit history, your credit capacity, and your collateral.

These are all important, even though no single factor completely decides whether you get the mortgage you want. And a weakness in one area can usually be made up by a strength in another.

Sidebar
If you know that your credit score is higher than 620, you're set, because you qualify for the guaranteed lowest rates in the country and no lending fees at Eloan. All you have to do is visit there and get pre-approved.

If your credit history is not so hot, then check out FullSpectrum Lending for special attention to your specific situation and the lowest sub prime rates anywhere.

How this guide can help

This "buying power" guide is intended to help you analyze all the aspects of your financial situation that are relevant to qualifying for a mortgage. (And pretty much everything is relevant!)

The credit guide discusses how your credit profile is built, what you can do to improve it, and what you need to do before you apply for a home loan.

The guide to debt capacity outlines how to calculate a healthy mortgage principal and monthly payment size for yourself that also looks good to lenders.

The page on your collateral discusses down payments. When is it okay to buy with little money down, when is it better to think smaller (or even wait longer).

These guides all stand alone, but it's a good idea to read all three. Just to make sure your mortgage expectations are reasonable and wise.



First up: Your credit

Get a little financial lesson every week:

Saving on taxes is a year-long process. Start learning how to save year-round by reading our weekly personal finance newsletter, with articles, tips, blog posts, and great deals that will save you money.

Subscribe here: