What do mortgage lenders look for?

4th Dec 2009 by Michael Haltman

Bottom line, particularly these days, is that lenders look for the borrowers ability to pay the monthly payments. While this is extremely simplistic and obvious, one whole part of the financial crisis we now find ourselves in is due to the fact that lenders went away from their knitting, and would basically lend to anyone with a pulse (even some without) because they KNEW that the value of their security, aka the house, would always continue to go up in value. We have seen that is definitely not the case, and as a result lenders have swung over to the other extreme. Qualified buyers are being turned down, and minimum credit scores required are up in the 700 range, where the old sub-prime loans would be in the mid-550's. Now lenders want larger down payments, higher credit scores, will use extremely conservative appraisal values and will often require the borrower to put a certain amount of months payments into escrow for even more security. When things go to an extreme one way, they then go to an equally wide extreme the other way.

This answer is the subjective opinion of the writer and not of FinancialAdvisory.com