Mortgage lenders receive many loan applications every week from people who want to borrow money to buy homes. A lender might approve some applications, but they won't approve all of them. Why is this? Lenders must evaluate loan applications through a series of steps to ensure that the borrowers are creditworthy. You might wonder how they decide who to lend to, so you might want to research this before applying. Here is a guide to help you learn the answers.

They ask for a financial statement

The mortgage lender you contact for a loan will ask you for some information. The first thing they'll want is a financial statement, which is a form that outlines your assets and debts. The difference between your assets and debts tells the lender about your net worth if you have more assets than debts. This amount tells the lender a lot about your financial state. You'll look like a good candidate to the lender if you have a significant net worth. However, the lender might deny your loan if you don't have a positive net worth.

They pull a credit check

Lenders also learn a lot about an applicant by pulling a credit check. A credit check reveals a person's credit history, and this report is quite comprehensive. Your lender will see if you have a good credit score. Additionally, they'll see what debts you have and your monthly payments for your debts. People who manage their credit well offer lower risks to the lender. Therefore, your lender will factor this in when deciding how to proceed with your loan request.

They run the numbers and risk

In addition to these things, the lender will run the numbers and consider the risk level you pose. For example, they will compare your income to your debt payments. Lenders call this a debt-to-income ratio, and it helps them see if you have enough income to repay the money if they agree to give you a loan. They might also consider your credit utilization rate, which tells them how much money you owe on your credit cards compared to your total credit lines. These ratios reveal your risk, which is essential for a lender to consider when analyzing loan applications.

Contact a mortgage lender to apply for a loan

A mortgage lender might approve your loan application if you have a steady income, good credit, and low debt. Are you ready to learn about the application process?

Contact a company like Clift  Enterprises Clift Mortgage to learn more.