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  • Believe it or not, mortgage lenders are in it for the money. Yes, I’m sorry it is me who has to break the news for you, but with the exception of a handful of institutions, such as your parents and your rich Aunt Martha, lenders do not hand over their money so you can buy a new home out of the goodness of their hearts. This means they must decide who they lend money based on hard and cold financial facts. Well, that and some smart guessing and estimating work. This article will look into the two factors a mortgage lender looks at before deciding if you are eligible to receive a loan. Knowing what lenders look for in a borrower could help your prepare better for a mortgage application and increase your chances of getting approved.

    So what do lenders want to know about you before they trust you with their cash? They want to know if you are able to pay back the loan and if you are willing to pay it back. The former is pretty straightforward to calculate. However, the latter can be a little more of a challenge because it goes into the realm of attitude and intention, which are always difficult to assess unless you have a mind reading instrument handy. Of course, you are a completely trustworthy borrower and lenders would be crazy not to do business with you. We know that, but how can we help borrowers see that also. This series of two articles will look at this question by looking into how lenders asses your application and what you can do to increase your chances of getting accepted and ensuring you can truly afford the mortgage payments.

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    Can you afford it?

    That is the first question a lender will consider when assessing your mortgage application. To answer it lenders require borrowers to provide answers to a battery of questions, such as what is your monthly income? What are your fixed expenses? How much debt do you already have? How long have you been working with your current employer? What collateral can you provide for your mortgage? And in some cases, is there anybody who will co-sign your mortgage? Providing this information should not be a problem for you. After all, you should have done your homework and found out this information before you even considered buying a home to see if you could actually afford it. Lenders are simply checking on the work you should have already done. So what is an acceptable level of debt? What guideline or trigger do lenders follow to kill your application based on your income and debt. We discuss this in second article of this series.

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