Home financing guidelines: what lenders want to see

If you need a mortgage, it helps to know lenders' typical home financing guidelines before you seek pre-approval.

To buy a home, you probably need a mortgage. All lenders have home financing guidelines they use to determine your eligibility for a loan. Knowing beforehand what a lender wants to see will help you get approved for the mortgage you need.

Income

Your income is one of the primary things that your lender will consider. Lenders want to be sure you can afford the mortgage payments on your loan without undue strain. Your prospective lender looks at all sources of income including your money from jobs that you've had for at least a year, plus commissions and bonuses.

The lender also looks at income like retirement, alimony, child support, investment income and social security. As with your employment income, other sources of income be in place for over a year and be slated to continue for several years in the future.

Debt-to-income ratio

The amount of debt you have is also important to a lender's home financing guidelines. The greater your debt, the less cash flow you have available to pay your mortgage. All long-term debts, like loans, lines of credit and credit cards, are typically included in the lender's calculations.

The lender looks at your credit history as well to determine if you tend to pay your debts on time. Any negative reports on your credit may make it more difficult to get approved for a home mortgage. Your credit history may also cause you to have a higher interest rate on your home loan.

Learn more about your home financing options in this article .

Savings

Your savings are also considered when a lender evaluates you for a mortgage. Most lenders' home financing guidelines require you provide proof of a down payment and savings for unexpected home costs. The 90-day balance in both your checking and savings accounts, as well as the equity in any real estate you own, helps you get a mortgage approval.

It's best to compare mortgage quotes from several lenders before choosing the right home loan for you. Go to RealtyNow to get quotes from reputable lenders now. Each lender has a different set of specific home financing guidelines, yet your income, credit and debt-to-income ratio will determine how much money you may borrow for a home loan. If you get pre-approved before shopping for a home, you know which properties are in your price range.