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15 Jan

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Your personal credit is one of the most important aspects of your mortgage application. While most people are aware of that, not everyone is aware of exactly how your creditworthiness is assessed by lenders.

This can be frustrating, as applying for a mortgage is a process that involves a lot of work, and being declined for a loan, especially if it’s for reasons you don’t expect or understand, is quite disheartening. Understanding exactly how lenders assess and evaluate your creditworthiness can make a huge difference when preparing your application, helping you ensure that there’s nothing missing.

So, how do lenders evaluate your application? Creditworthiness is usually judged on two main things: the borrower’s ability to make their loan repayments, and their willingness to do so. This is assessed in a number of ways.

Ability to Repay

Your ability to repay your loan is very important when it comes to your creditworthiness. Many potential borrowers apply for loans that are too high or too difficult for them to pay off, and this results in disappointment if the application is denied, or huge debt problems if they do get the loan but are unable to pay it off.

Your ability to repay your loan is assessed by your employment information, your credit history, and your general trustworthiness. If you have a consistent history of employment, and are currently employed with a salary high enough to easily make your monthly payments, that shows you are responsible and able to pay your loan off. If your employment history is inconsistent, or you are currently self-employed or have a salary the lender thinks is too low, you may have to wait and build your employment history up before applying for a loan.

Your credit score shows your history of making loan repayments. Ideally, you will have a high credit score that shows you have consistently made your loan payments on time, and haven’t borrowed beyond your means. Unfortunately, even if you are currently responsible about paying your debts back, and are gainfully employed, past debt can come back to haunt you in your credit rating. You can continue to build your credit score by making all payments on time and in full.

Debt History

Lenders look closely at your history of borrowing before approving you for a mortgage loan. Lenders prefer to see that your income comfortably exceeds your outgoing expenses. Before applying you should make sure that you are comfortable paying off any existing debt, as well as the loan you are applying for. If the lender believes your debt is too high for your income, they may decline your loan.

Willingness to Repay

Lenders take every last detail into consideration when considering your application, and this include your character. You’ll want to prove that in the past you’ve been financially responsible, and used your money (loan or otherwise) in ways that are responsible. This is something to keep in mind even if you’re not going to apply for a mortgage for a long time. You are always building your credit history, and spending irresponsibly while you’re young can affect your credit score, and any future loans for years to come.


If you have existing secured loans, such as car loans, or home equity, it means you have something to provide as collateral against the loan you’re applying for. When looking at your application, lenders will take into account any assets you own that can be used as collateral. They will look at your loan application against the value of this collateral, and take the remaining equity into consideration when assessing your application.


Lenders want to know what you will be spending the loan on, such as a personal residence versus an investment property. While it can be tempting sometimes to gloss over certain things, or even straight-out lie on your mortgage application, you must be completely honest and forthright about your financial situation, current employment, employment history, debt history and plans for the loan.

Your lender will confirm everything you write in your application, and if they detect any dishonesty you may be declined for your loan. It’s always better to be honest, even if the truth may not help you get approved for a loan. For example, if there is an inconsistency in your employment history, you should simply write an explanation of it, maybe providing any documentation from your past or present employer to show that you are presently consistently employed.

As you can see, there are many factors that lenders take into account when going over your loan application. The process is quite detailed and can be difficult, especially if it’s your first time applying for a mortgage. If you are unsure about your creditworthiness, the best thing to do is to hire a mortgage professional to advise and assist you with your application.

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