Five things a bank looks for when approving a home loan.

Each bank’s specific criteria for approving mortgage loan applications is a little different. However, there are several things that tend to be at the top of most banks’ priority lists.

Here are five things Cadence Bank looks for when reviewing mortgage applications.

1. Credit History

Banks evaluate borrowers’ credit histories by carefully examining their credit reports and credit scores. These are compiled by Equifax, Experian and TransUnion, which are the three major credit reporting bureaus in the U.S. The bank may obtain a credit report and credit score from one or all three of the credit reporting bureaus.

If you’re concerned about your credit score, you can improve it by following a few best practices, like demonstrating a consistent and on-time debt payment history.

2. Employment History

Making sure you have a stable employment history helps ensure that you’ll earn enough income in the future to meet your mortgage payment obligations.

Some borrowers are concerned because they’ve changed jobs in recent years. However, most lenders are less concerned about this than about long periods of unemployment between jobs. Employment consistency is important because it helps ensure steady income.

3. Assets and Ability to Make a Down Payment

Simply put, you need to demonstrate that you have enough money to complete the transaction. This is why the bank will ask for current bank and investment account statements.

If there have been large deposits into an account recently, you’ll need to explain where they came from. Gift funds are allowed to help with the down payment, as are sales of stock, but you’ll need to submit a letter explaining the source of this money.

You’ll also need to demonstrate that you have at least enough reserve cash to cover the first six months’ of mortgage payments, including taxes and insurance. This money can reside in a bank checking or savings account or an investment account.

4. Debt-to-Income Ratio

This is the percentage of your gross (not take-home) income that you have in outstanding debt. The bank will add your monthly mortgage payment, including taxes and insurance, to all of your existing debt to calculate this ratio.

For qualifying mortgages, the maximum acceptable debt-to-income ratio is 43 percent. However, many lenders, like Cadence Bank, offer some non-qualifying mortgage programs that allow higher debt-to-income ratios.

If your ratio is higher than this, you may need to consider purchasing a less expensive home or paying off some of your consumer debt.

5. The Loan Application Itself

The loan application is the part of the mortgage application process that borrowers have the most control over. Unfortunately, it’s also the part where many borrowers come up short.

Borrowers need to provide all of the information and documentation that’s requested in the application. Failure to thoroughly complete the application will result in underwriting delays that could jeopardize the closing.

Be Prepared

If these five things are in order, then most applicants are good to move forward with the application process. Therefore, keep this checklist handy so you’re prepared when it’s time to apply for a mortgage loan.

If you'd like more information or have additional questions about getting a mortgage, please contact us. You can also find a Cadence Bank mortgage professional near you.

This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.