Ask the Expert: I have never applied for a mortgage. What does a lender look for in an applicant?

This is one time in life when your sparkling personality and good intentions don’t matter so much as the financial facts!

Lenders want to know: Can you afford the loan? Will you pay the loan?

The answers are calculated using documents. Mortgages are loans that span decades and require the lender to risk a lot of money on your promise to pay. Your commitment is a promise to pay back the lender over many years to come.

With that much money and trust at stake, you have to provide documentation that you can do just that.

Income, employment, assets: Just like on a rental application, you have to prove you are employed. With a mortgage, you will need copies of tax statements, paycheck stubs, and W2 forms. You want to prove steady income over at least two years in the same line of work, if not at the same employer. This tells the lender that you do work and likely will work in the future. If you are self-employed, you’ll need to provide more documents.

The best case is that you also have a savings account in which you have at least two months of mortgage payments. If you will be dead broke after you sign the mortgage, this might go against your application.

Debt: Lenders use a formula called the debt-to-income (DTI) ratio. You can figure it out yourself. Simply add up all your monthly payments (credit cards, auto loans, child support, alimony) and divide that by your monthly income. The percentage you get is your DTI ratio. That should be 36 percent or less. What you don’t want is maxed-out credit cards or applications for new credit.

Down payment: Do you have enough cash to make the required down payment? Can you document where you got the money? Best case: Equity from a home you are selling or your own savings.
Purpose: If you are buying a home, do you plan to live in it? If it is to be a rental, you may need to show more information.