Credit Score

• The borrower's credit score is an important element of mortgage qualification guidelines because a high (or at least adequate) score assures the lender that the borrower has a good (or at least acceptable) record of making payments on other types of debts, which might include prior or current mortgages, auto loans, credit cards and so on. Borrowers who have so-called "impaired" (or less than good) credit may still be able to obtain a mortgage, however, at a higher interest rate. There is no set minimum credit score that will result in a firm denial because lenders use different qualifying guidelines and the credit score is only one element in the total loan application.
  
  

Debt-to-Income Ratio

• A borrower who earns a high income might seem to be more creditworthy than a borrower who earns a lower income. However, lenders use another measure to assess a borrower's ability to make the monthly payments on the mortgage. This measure is called a debt-to-income ratio and it's used to figure out whether the borrower has too much debt relative to her income. For example, a borrower whose monthly debts with a mortgage would amount to 70 percent of his income likely wouldn't qualify for a loan of that size, even if he earned a lot of money because the debt ratio would be too high.
  
  

Down Payment

• Borrowers typically are required to make a down payment as one of the requirements to receive a loan approval. A loan that's insured by the Federal Housing Administration, a U.S. government agency, requires one of the lowest down payments of just 3.5 percent. Other loans, not backed by the FHA, typically require a higher down payment. The lender considers the down payment relative to the purchase price of the home.
  
  

Loan-to-Value Ratio

• The property must also be approved by the lender before the borrower will be able to obtain the loan. Typically, the lender requires an independent appraisal of the property value. This value is compared to the loan amount in what's called a loan-to-value ratio. For example, if the appraised value of the property is $100,000 and the loan amount is $99,000, that's an LTV of 99 percent. If the loan amount is too high as a percentage of the property value, the loan likely won't be approved.
  
  

Documentation Requirements

• Borrowers typically are required to provide extensive documentation to prove to the lender that the information on their loan application is true and accurate. Lenders may demand copies of paycheck stubs, income tax returns, financial statements (for those who are self-employed) and other paperwork.