Also read the guide for secured loans when looking to get financing for a home loan. How does a mortgage lender decide to approve or deny an application? There are three main areas that an underwriter takes into account when making their decision.

Your monthly income will determine if you qualify for the monthly payment. The monthly housing expense (principal and interest, plus 1/12 of the annual taxes and insurance) cannot exceed a certain percentage of your income, usually 28%. However, lenders offering mortgages at 125% of the value of the property are more lenient.

If you make your current payments (credit cards, car loans, etc..) on time, you are likely to continue to exhibit the same behavior. Obviously lenders like to see a positive character when it comes to being credit wise.

Collateral refers to the home being refinanced. An appraisal may be done to ensure that the house is worth the amount being loaned. An independent appraiser uses recent sales of comparable homes in the area to determine whether your price is similar.

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