Most borrowers do not have a lot of money that's just the point of financing a house. But coming up with several hundred dollars a month is far easier than writing a check for $200,000. This is where mortgages and lenders come in. There financial institutions are in a competitive industry, meaning they want to make money, meaning they want to sell you a house. These companies earn profit in interest and so contrary to what it may seem from the complicated loan application process, they are trying to help buyers find an affordable mortgage plan. However, this does not mean that a lender will approve anyone and everyone. The lender only makes money if the full term is paid out. If there is a foreclosure then both the buyer and the lender lose out on a great deal. Therefore, lending institutions are not scrutinizing consumers to make sure that they are filthy rich. No, they are placing what you might call an educated "gamble" on a buyer who has consistently proven him or herself in paying back all past debts. Weeding out consumers who cannot prove themselves to be a reliable source of "income" saves both parties a lot of trouble and expense. Indeed, to lending institutions people represent steady amounts of income. This is why you should never take rejection on a home loan personally.

The Credit Report

One of the first items a lender will look at is your credit report. A credit report details all of your past debts, from current accounts open to past charge offs and past due amounts. If a potential borrower has bad credit due to a history of unpaid bills, then most lending institutions will consider him or her a huge risk. Never assume that just because you don't remember any incidents with credit that your score is flawless. Having no established credit is bad credit. Having a car repossessed, medical bills, missed credit card payments all of these issues could come back to haunt your credit rating. Last but not least, even if you you have paid off every single bill you have ever had to satisfaction, remember that credit card fraud is a major problem in this technological age. You may have some unresolved payments on your card and not even know it!

Your Gross Income

A lender will also consider you and your households' gross income. Not only is the amount of income important, but how you earn that money will be analyzed. If you have had a steady job with a high salary, then this part of the loan application may not be an issue.

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