Mortgage Guide

Questions Lenders Ask and How They Affect Your Loan

Your mortgage lender will want to know a lot about you before approving your loan application, and justifiably so; they and their underwriters want to be assured that you meet their minimum level of creditworthiness before lending you money.

Questions lenders ask

  • Employment and income: Where do you work? How much do you make? How long have you been at your job? How is your income derived -- steady salary or irregular income? If it's the latter, you may need to provide more details to obtain a favorable interest rate.
  • Outstanding debts: What recurring debts do you have? How much do you pay a month for auto loans? Credit cards? How much of your monthly pretax income do these debts consume?
  • Cash reserves and assets: How much money do you have in the bank? How much will be left after you pay your down payment and closing costs?
  • Down payment: How much money are you putting down? Is this your own money? If not, is it a gift from your parents? A nonprofit agency grant?
  • Loan purpose: Is this mortgage for a home buy or refinance? If it's a refinance, do you want to take cash out at closing to pay off other debts? If so, how much?
  • Property use: Do you plan to live in the house? Is it investment property?
  • Property type: Is it a single-family home? A condominium? A duplex?

The following responses tend to work in your favor:

  • Steady employment (two or more years) with the same employer or in same line of work.
  • Low debt: no recent major buys (such as automobiles) and a debt-to-income ratio of 36 percent or less.
  • Loan is for straight home purchase (or rate-and-term refinance).
  • Property is detached single-family home to be used as primary residence.
  • Down payment of at least 5 percent of sales price with your own money.
  • You'll have at least two months' worth of mortgage payments in the bank after closing.

These responses tend to work against you:

  • Self-employed or contract worker.
  • High debt: credit cards "maxed out," total debt-to-income ratio more than 36 percent.
  • Property is a duplex or condominium, to be used as a vacation home or rental.
  • No cash left after home buy and closing costs.
  • Down payment is 3 percent or less of buy price and money is borrowed.