Thinking about a home loan, but concerned you may not be approved by a lender? Wondering whether you can do anything about it? Knowledge is power. The more you know about lending decisions, the more you can be prepared to move swiftly through the mortgage process.

Some major factors affecting which loan you choose and that are best for you are as follows:

Lenders want to know you can repay the loan and that you're a good credit risk. Your finances play a large part in a lender's decision to approve a home loan. At Prospect Financial Services we assist you in providing the appropriate documentation and in moving quickly through the process.

Here are three of the areas lenders look at and some questions they ask themselves when reviewing your application and paperwork.

1. Cash on Hand - Does this customer have money available for closing costs and a down payment (if purchasing)?
   
   
2. Ability to Repay the Loan - Will this customer earn enough money now and in the future to make home loan payments? Is there excessive other debt, like credit card
   balances, that a mortgage payment may be difficult to pay?
   
   
3. Credit History - Has this customer paid bills on time in the past

Is the home worth the money you're paying for it? Lenders have to know this in case they end up with the property if you do not repay your loan.

If the borrower meets with misfortune and cannot repay, the loan may be foreclosed and the lender becomes the owner of the property. Lenders then sell the property to recover their losses. In other words, your home is used as collateral on the loan.

Lenders use appraisals when they decide how much money you can borrow. It is part of the underwriting process. They look at an appraisal to see if, for a home purchase, the estimated value of the home matches the purchase price. For a refinance, the home's estimated value equals or exceeds the amount being borrowed.

Estimating the value of a home is the job of an appraiser. Here are some things an appraiser may do before submitting a report - an appraisal - giving his or her opinion on the value of a home to a lender:

1. Visits the property and evaluates the inside, outside and surroundings
   
   
2. Checks the location to make sure things like water and utilities are available
   
   
3. Finds out about local property taxes, building codes and zoning restrictions
   
   
4. Compares the sales prices of similar homes nearby
   

A property appraised at a lower value than expected can result in the lender asking for a larger down payment or offering to lend you a lower amount.

When Buying: Ask your real estate agent for sales prices of homes similar to the one you are thinking about buying. Several companies offer online estimates of property values. You type in a street address and receive an estimate based on statistics. This information can also help you decide how much to offer a home seller.

When Refinancing: Make sure additions and other remodeling meet local building codes. Maintain your home inside and out - from the top of the chimney to the furnace in the basement.

Each type of loan has its own rules for qualification. Where one loan might not work for you, another might. Lenders are good at numbers. They calculate the risk that a loan might not be paid back. They also know which kinds of loans they can be more flexible with; giving borrowers options that may make it easier to get a loan.

Learn About Loans. Each type of loan has advantages and disadvantages. Loans that are easier to qualify for may not always the best deal. You need to weigh their different benefits based on your financial situation.

Call one of our Mortgage Consultants at 877-468-4728. They are experts in helping you find the right loan for your needs.

Not all lenders are alike. Some have more flexible guidelines than others and each has a different lending philosophy. The way a lender does business affects how flexible they can be when they consider your loan application. The type of organization the lender belongs to also makes a difference.

Who are mortgage lenders? They may be:

• Banks
  
• Savings and loans
  
• Thrifts
  
• Finance companies
  
• Mortgage companies
  
• Subsidiaries of multinational conglomerates
  
• Brokers representing a variety of lenders

These are very different types of organizations. They have different financial resources and different philosophies about lending but they all use the same criteria when approving a loan:

CAPACITY - The lender will weigh your housing expenses and total debt against your monthly income to determine your ability to repay a loan. They'll also need proof that you have the cash available for down payment and closing costs by verifying funds from sources such as bank accounts, stocks, bonds, mutual funds, sale of an existing home, or gifts from family members

CREDIT - To determine your credit risk, the lender will look at previous mortgage payment history, rent payment history, credit card use and installment debt payment history. If you pay your bills regularly and on time, you're demonstrating the integrity that lenders are looking for in a borrower.

COLLATERAL - When you ask for a home loan, you're putting the home itself up for collateral, so the lender will want to know what the home is worth.

Get to know your lender. Ask if the organization follows a more conservative or more flexible policy when making decisions to approve a loan. Ask if they have access to many different products and programs or just one line of business.