Income

• All stated, or claimed, income must be verifiable. Acceptable sources of income verification include pay stubs, W-2s and tax returns for salaried employees. Self-employed home borrowers must have two years of tax returns that they can readily produce to a lender when applying for a mortgage. Individuals who work on commission alone will undergo a review of total commissions earned over the past 24 months to determine a monthly average.
  
  

Debt

• Lenders will review all consumer debt. To receive a fast approval, all loans in the borrower's name must be up to date and paid on time for a period of at least two years. The total amount of debt will be factored against a consumer's income to calculate a debt-to-in come ratio. If your debt exceeds 40 percent your monthly gross income, your chances for a loan approval will decrease.
  
  

Credit

• Credit ties in directly with debt-to-income ratios. When lenders review a credit report, they determine the "risk factor" of a borrower defaulting on a mortgage. Borrowers with poor repayment histories are often asked to provide letters to explain late or missed payments to creditors. Borrowers with less than perfect credit can still be approved for a loan but are often faced with higher interest rates and larger down payment percentages than borrowers without credit blemishes.
  
  

Money for Move In

• In addition to down payments, many lenders want to make sure that borrowers have funds in "reserve" after move in. This makes the consumer less of a risk factor since they have demonstrated that they have money to pay for moving expenses and other associated costs of home ownership, while being able to carry a mortgage payment.
  
  

Employment

• Lenders like stability. Consumers who have at least two years with the same employer or in the same profession will be considered a better loan risk than individuals moving from one profession to another or one specialization to another in short time spans.
  
  

Appraisal

• Lenders want to make sure that a home is worth what they are lending to a consumer so that they are not making a loan that is "upside down." Most lenders will require an independent appraisal as part of the mortgage approval process. If the appraisal doesn't equal at least the loan amount, the consumer will either have to pay the difference in cash, have the seller agree to sell the home for the appraised value or walk away from the transaction.
  
  

Expert Insight

• When applying for a home loan, it is important that you inform your loan officer of any changes to your situation, as it can affect a home loan approval. Not communicating things to your loan officer can mean a cancellation of your loan up to the day and time of closing.