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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. Lenders 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 seasonal/commission)? If your income is irregular, you may need to provide more detailed proof of income 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? Is it a nonprofit agency grant?

Loan purpose: Is this mortgage for a home buy or a 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?

Good vs. Not-So-Good Responses

Regarding those questions, the following responses tend to work in the borrower’s favor.

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

These responses tend to work against you.

  • Self-employed or contract/gig worker.
  • High debt with credit cards maxed out and a total debt-to-income ratio more than 36%.
  • Property is a duplex or condominium, to be used as a vacation home or a rental.
  • No cash left in the bank after you buy the home and pay for closing costs.
  • Down payment is less than 5% of the buy price and the money is borrowed.