Mortgage Lending Criteria for First-Time Home Buyers

As a potential first-time home buyer, you will want to understand the mortgage lending criteria that are used to evaluate you. Here are a few things that your lender is going to look at when deciding whether to give you a loan.

Credit History

One of the most important things in the loan approval process is your credit history. A lender is going to closely evaluate and scrutinize everything in your credit report. Therefore, if you have had some questionable transactions, you need to be prepared to answer questions about them. The lender will look at your credit score and determine whether you fit into an acceptable lending category. Each first-time home buyer program will have different requirements when it comes to credit scores. Some of them will work with borrowers that have a minimum credit score of 640. Others might require a score of at least 680 or 700. Therefore, when you are shopping around for a loan, it might be a good idea to get a copy of your credit report. Then, you can see what your credit score is and find out which programs might be willing to work with you.


Your potential mortgage lender is also going to pay special attention to your income. Depending on how much money you want to borrow, your income level will have to be at a certain amount. The mortgage lender is going to want to know where you work and how much money you make. They are going to call your employer and verify everything with them also. If you have any other sources of income, they are going to want to know about those also.

The lender will also use the information from your credit report to compare your income to the amount of debt that you have. This will give them a debt-to-income ratio that they can work with in evaluating your application. Each lender will also have their own criteria as far as a minimum debt-to-income ratio.

Down Payment

Depending on what type of loan you are trying to get, you may be required to come up with a down payment. Some programs that are designed for first-time home buyers will actually allow you to make a lower down payment than other programs. For example, with an FHA loan, you can get by with paying only 3 percent of the total purchase price. Other lenders might require you to pay 5 to 10 percent down. Therefore, it is important that you have some money in savings before starting this process.

Property Considerations

The property that you choose will also play a role in the loan approval process. Many programs for first-time home buyers will have a maximum loan amount associated with them. Therefore, you will have to choose a home that is below that limit in order to qualify. They will also send someone to inspect and appraise the house before approving the loan.