Here are the main factors lenders use to determine loan approval:

Credit usually the first thing an application processor will do, is obtain your credit report. Your credit report with your credit activity and history will be a good indication of how much risk is involved in lending money to you. Delinquency and other credit problems may affect the results of your qualification.

Income and job stability lenders don't want you to borrow more than your capacity, therefore your loan processor will contact your employer to obtain information such as your income, how long you have had your present job and what are the prospects of keeping your job. They might even contact your former employer to make sure that you have good history of uninterrupted income.

Property appraisal since your property will be used to secure the loan, lenders must know the value of your property by getting a written report prepared by a person who evaluates property for lenders (appraiser). The appraiser will provide an estimate or opinion of the fair market value of your property.

Loan to value ratio a way that lenders determine how risky a mortgage might be. The formula is the loan amount divided by your property's appraised value. Generally, the more you put as a down payment - the lower your loan to value ratio and your as a result the better your chances are to get the loan approved.

The loan process step by step:

Getting pre-qualified is the first step in which the lender collects income, debts and repayment capability information from the borrower to determine the suitable type of loan.

Application is the actual process of filing information for loan request. At this point the borrower should get an itemized estimate of the various fees, costs and down payments.

Loan processing refers to the verification phase of the application. The loan processor checks the borrowers credit history and other property issues.

The underwriting process determines whether the mortgage program is acceptable by the lender. Sometimes additional information is required from the borrower.

Mortgage insurance in some cases lenders may require you to purchase an insurance police that will protect them in the event that the borrower defaults on it's loan. You might want to compare your mortgage insurance with a high quality term life insurance.     

Closing is the finial act in which the lender transfers funds to the seller in exchange to the property's title. At this point the loan process is done and the property is bought by the borrower.    

Closing costs:

The total costs involved with home purchase are usually 3-6% from the purchase price. Closing costs are in addition to the down payment amount. The closing costs may vary depending on the lender's requirements and the type of the property. These are the most common closing costs types: 

Costs of  transferring and establishing property ownership are the escrow fees, title insurance and title search. Title search is done by a company or by the escrow and it's purpose is to make sure that the property really belongs to the seller and there are no debts on the property record. The title insurance policy is required by the lender to protect him in the event that the the title verification went wrong (somebody has claims to the property) 

State and local government fees may include city/town taxes, county and state taxes and property taxes to be paid in advance.

The initial costs to obtain the mortgage loan are documentation fees, credit reports and credit checks, appraisal and notary fees, inspection fees, processing fees, underwriting fees, interest and points payments and loan origination costs.

Get prepared - know your closing costs ahead of time closing costs may play crucial roll in deciding whether to take a loan or not. Know your rights: a lender must provide you with a Good Faith Estimate of all your closing costs, all that within three days from application. Based on the Truth in Lending Act, the lender must provide you with the estimated Annual Percentage Rate (APR). Remember that the APR represents a yearly rate for the cost of your loan, thus, contains additional costs and therefore higher than the initial interest rate on your mortgage loan.  

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