How Do Lenders Decide Which Loan Program To Offer?

13 May 2021
 Categories: , Blog


If you start evaluating mortgage loans, you will find many loan programs available for people to use. How do you know which is the right one for your situation, and how can you find the best loan? The best way to do this is by working with a mortgage lender that offers a variety of loan types. Your lender will evaluate your situation to find the best loan program for you, and here are the factors they consider when choosing a loan program.

Your Credit Score and History

Lenders factor in a lot of details when determining which loan program to pursue for an applicant, including the person's credit score. Lenders care about the person's current score, but they also care about their credit history. If the person has a bankruptcy or foreclosure from the past, it might appear on their credit report. If so, this can affect their eligibility for a mortgage loan. They might have to wait longer to get a loan, or they might not qualify for certain loan programs. Your lender will carefully review these things before pursuing a specific loan program.

Your Down Payment Amount

The second factor your lender reviews is your down payment amount. Your lender will ask you how much you can put down on a house purchase, and this amount also affects your eligibility. Some loan programs allow people to buy houses without large deposits, but other programs require a lot of money down.

Your Debt-to-Income Ratio

Your debt-to-income (DTI) ratio is a comparison of your debt payments to your income. Low DTI ratios offer more flexibility with loan programs, while high DTI ratios restrict your options. If you want to qualify for more loan programs, work on your DTI ratio. You can improve it by paying off debts and increasing your income.

Your Income

Finally, your lender will look at your income to see how much you make. Your income controls how much you can afford to repay, so it is a vital factor that lenders consider. If you want to get a mortgage loan, you will need to prove that you can repay it.

Lenders base their decisions on your personal details, including the ones listed here. If you would like to get a mortgage loan, you might want to work on improving these things before applying. You can learn more about loan programs by speaking with a mortgage lender of your choice.