Factors Used to Determine the Creditworthiness Of a Borrower

The lenders look at various factors and information to determine the creditworthiness of the borrower. These are some of the common practice that the mortgage lender looks at.

Integrity

The integrity of the borrower suggests how he is going to deal with the mortgage debt in the future. The integrity of the borrower becomes even more important if a situation arises in which the borrower finds it difficult to meet the mortgage payment due to financial difficulties. A borrower with less integrity might shirk his responsibility for the loan and walk away from the home specially in him and circumstances where the value of the home has depreciated to be below the balance on the mortgage loan.

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Proving Income and Job Stability

During the initial part of the 2000s, namely from 2000 to about 2005 it was ridiculously easy to get mortgages on no documentation basis. The word-of-mouth information that many people provided the lender with and cursory documentation were able to get approved for a mortgage loan. No proper check was made into the borrowers income, assets or is existing debt liabilities. Borrowers claimed false information on their application forms in order to borrow the amount that required. However this trend has fast changed.

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Debt to Income Ratio

The mortgage lender will also take into account the amount of debt that you already. While the lender may ignore the very short-term debt that you’re likely to pay off in the next 6 to 10 months it will count the revolving credit on your credit card, balance on your existing automobile loan, existing student loans, personal loans etc.

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