What Does a Mortgage Broker Look for in a Loan Application?

What Does a Mortgage Broker Look for in a Loan Application?

If you’re nervous about applying for a home loan, don’t worry -- you’re not alone. Many people wonder what a mortgage broker really looks for when they review a loan application, and worry how they’ll measure up.

What a mortgage broker looks for is actually pretty simple. He or she wants to see evidence that you can afford the loan, and that you’ve been relatively responsible with other debts or loans. (This doesn’t necessarily mean that a broker expects to see a perfect credit score, as I’ll discuss in a moment.)

A mortgage broker wants to see that you can afford the loan. Although income is big in determining this, it’s not the only thing a mortgage broker will look at. He or she will also look at what you have in existing debt -- for example, car loans and credit card debt. Your debt-to-income ratio, which is very important in determining how much of a mortgage you can afford, is calculated by dividing your total monthly minimum payments by your total monthly income.

The ideal debt-to-income ratio is 41 percent or less, as that amount of debt is fairly easy for people to control. However, many people have more than ideal amounts of debt, and mortgage brokers realize this. Even if you are concerned that your debt-to-income ratio is too high to qualify you for a loan, you should still discuss your options with a mortgage broker -- only he or she can tell you for sure whether you can get a loan, and what type of loan you can expect.

A mortgage broker wants to see a credit score that is average to high. Your credit history is important to a mortgage broker, as it indicates how well you have handled debt in the past -- or even how you are handling it right now. The higher your credit score, the more confidence lenders are going to have in your ability to repay a loan, and the better deal you are going to get.

Of course, as I’ve already mentioned there are a lot of people who have less-than-perfect credit ratings or even no credit. Often these people worry that they will not be able to get a loan, because of an account they’ve messed up on in the past or lack of credit history. This isn’t necessarily true. First of all, there are things you can do to improve your credit rating before you start shopping for a home loan. But even if you can’t fix your credit rating so that it’s perfect again, you can often still get a mortgage if you don’t mind paying a slightly higher rate than you would have otherwise.

As you can see, what a mortgage broker looks for in a loan application isn’t mind boggling. And since most applicants are less-than-perfect, you shouldn’t worry that your application is going to be laughed right off your broker’s desk. A good mortgage broker knows how to find good deals and make things work, so it’s always worth a try!

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