If you are in the market for a new home or you are looking at buying a new piece of property, chances are you will need a mortgage loan of some kind.  There are many factors that go into determining how good your chances are of being approved by the lender for the loan amount you need. Here are some of the most critical factors tat you need to review and see where you stand in regards to before applying for loans for your mortgage.

Credit History

First on the list is your credit report and credit score. Lenders focus in on three specific components of your credit report. “A high credit score is any score over 700, but the closer you are to a perfect score of 850, the better. You can’t achieve an amazing credit score overnight, but if you pay your bills on time, pay off debt and limit your number of credit inquiries, you’ll slowly increase your rating and become a prime applicant” (TotalMortgage). Even if you have a lower credit score you may still get approved but there will be other terms and imitations you will have to abide by- less total loan amount or higher interest rates.


“In addition to reviewing credit histories and assessing ability to make a down payment, banks and lenders often review their applicants’ employment histories. Lenders want to ensure that borrowers can afford to make regular mortgage payments. You will need to prove that you have a steady sources of income, so it’s best to avoid quitting your job or switching careers before you apply for a mortgage” (SmartAsset).  It isn’t enough to land a cushy job three months before you apply for a mortgage. Lenders often verify at least two years of employment and see a steady and reliable amount of pay month by month.


Having a substantial amount of money in the bank makes you more appealing to a banker. They want to see that your assets are stored in liquid checking and savings accounts, so you can easily withdraw money to pay your mortgage bills if you need to. “You’re expected to use your income to repay the loan, but some lenders may want to know whether you have assets that can be converted into cash quickly to make payments in case you lose your job or experience other financial setbacks. These assets can be in the form of a savings or money market account, stocks or government bonds. If you have liquid assets to cover the cost of the loan, the lender may view you as less risky and may offer you a lower rate” (NerdWallet).


“Even when your loan is approved, it will be approved based on certain loan conditions or loan contingencies. Some loan conditions are standard for all loans, such as the condition that you buy hazard insurance in the amount of the mortgage loan and name the lender as an insured party on the policy. Other conditions may be specific to your loan. The lender could approve the loan on the condition that you pay off your student loan to reduce your monthly debt or that you provide a certified copy of your child support agreement to prove that you are entitled to that income” (MAAR). Conditions can also refer to the state of the housing market and economy and what you’re planning on using this loan for. Lenders may also want to know what your reason is for buying this home.


Collateral represents the assets lenders can take from you if you can’t pay off your mortgage. How much is this property worth to the bank if the loan goes south? They will also look at what you can offer as a down payment for the loan. “The expected down payment can be up to 20 percent or more of the home’s purchase price. If your credit history is less than stellar, you may need a larger down payment in order to secure a loan. Down payment requirements vary by lender and loan type, so be sure to verify the required down payment with your preferred lender. Your lender will also want to know that you have enough cash to cover your closing costs; if you don’t, you might have trouble getting your application approved” (Zillow).