If you’re planning to purchase a home, one of the most important steps is securing a mortgage loan. Whether you're a first-time homebuyer or a seasoned homeowner, it's essential to understand what mortgage lenders look at before they approve your loan application. Here’s a list of things to keep in mind when applying for a mortgage loan.

Credit history. Your credit history provides the lender with a snapshot of how you have repaid your past and existing debts. Demonstrating a good repayment history reassures the lender that you will make payments on your home loan in the same manner. It’s a good idea to review your credit report to check for any inconsistencies before applying for a loan.

Assets. Lenders want to see that you manage your money well and can handle an increase in your mortgage payment. They will assess your checking and savings accounts, as well as the value of your possessions. They want to make sure you have enough money to pay back the loan even if you lose your job.

Liabilities. Lenders will consider any outstanding debts such as credit cards, car loans, child support or student loans you may have. Your assets and liabilities are used when calculating your debt-to-income ratio.

Debt-to-income ratios. Mortgage lenders will calculate your housing debt-to-income ratio by dividing your monthly mortgage payment including taxes and insurance by your monthly income prior to any deductions. Your total debt-to-income ratio includes all your monthly debts in addition to the mortgage payment. Lenders typically want to see that your housing ratio is no more than 33% of your income and your total debt ratio is no more than 40% of your income. A high debt-to-income ratio indicates that you may have difficulty making mortgage payments which could make lenders hesitant to approve your application.

Income and employment. Lenders need to ensure that you have a stable source of sufficient income to repay your loan. Looking at current and historic employment (usually at least two years of employment in the same industry) and income will help them assess your ability to make timely mortgage payments.

Property appraisal. The lender will order an appraisal of the property to ensure that it is sufficient to support the loan amount. The appraisal will also assess the property's condition and if any repairs are needed. The appraisal is different from a home inspection. A home inspection can help you to determine if there are needed repairs on the home that are not readily apparent.

We know the home loan process can be overwhelming. Whether you’re ready to purchase a home, get prequalified or refinance a residence you already own, we're here to help you every step of the way. Explore your options and contact us at 844-468-9369.