What Determines Your Mortgage Prequalification?

The lender performs a basic evaluation of your income and credit for mortgage prequalification to purchase a home.
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If you are a first-time homebuyer, mortgage prequalification is the first step before making an offer to purchase your new home. Shopping around and submitting applications for loan prequalification from lenders can help you determine your prospects in finding a mortgage that fits within your budget. It will also provide you with a basis for determining the highest purchase price of your future home.

Mortgage Loan

Before submitting an application for prequalification, it is important to calculate how much you are willing to pay on a monthly basis toward the repayment of a mortgage loan. After being approved for a loan, you will be required to submit payments toward the principal balance of the loan plus the accrued interest charges, whether you are approved for a fixed or adjustable interest rate. The prequalification process involves the lender evaluating your current monthly expenses in proportion to your income.


You have the option of determining whether you qualify for a mortgage loan by completing an application, whereby you will be required to submit your name, Social Security number, address and contact information. You must also specify the type of mortgage loan you seek -- such as a loan for the purchase of a home or refinancing of an existing loan. In addition to providing basic identification information, you must include your gross income and monthly revolving and installment debt. If you are purchasing a home, the lender may request the total sales price of the home and the down payment you intend to make. You also may be required to list your assets, including the balances of bank accounts and retirement accounts.

Debt Ratio

Lenders will determine your ability to prequalify for a mortgage by evaluating your monthly income and expenses and determining your debt-to-income ratio. Lenders apply basic underwriting standards based on the information you submit. Lenders may also compare your debt ratio percentage to a standard maximum debt ratio.

Credit History

After giving the lender permission, it will evaluate your credit history and credit score in an effort to determine your creditworthiness. By doing so, the lender can identify its potential risk of loss. Your credit history indicates whether you are making timely payments to creditors, shows your credit card balances and reflects the various types of credit you have obtained.

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