The lender's criteria: the property and the borrower's ability to repay

Two sides of mortgage underwriting

A lender evaluates both the property as security and the borrower's ability to repay. Valuable collateral does not by itself establish affordable payments, and a strong borrower does not establish adequate collateral.

Property and loan-to-value

An appraisal estimates property value; the purchase price is the parties' agreed price. Condition and marketability matter to the lender's security. An appraisal does not replace a home inspection.

Loan-to-value (LTV) = loan amount ÷ underwriting value × 100. A $240,000 loan against $300,000 of value has an 80% LTV. Purchase lending commonly uses the lower of purchase price or appraised value. A low appraisal can reduce the loan amount available and increase the cash needed from the buyer.

Borrower and qualifying ratios

Lenders review documented income and its probable continuance, monthly debts, closing funds, reserves, and credit history. Credit history addresses repayment behavior; income relative to obligations addresses capacity. Reserves remain after closing, separate from the down payment.

• Housing ratio: monthly qualifying housing expense ÷ gross monthly qualifying income.
• Total debt ratio: housing expense plus other counted monthly debt payments ÷ gross monthly qualifying income.

With $6,000 monthly income, $1,800 housing expense gives a 30% housing ratio. Add $600 other debt: $2,400 ÷ $6,000 = 40% total debt ratio. Program definitions and limits vary; these are examples, not universal approval thresholds.

Fair lending applies in New York

The federal Equal Credit Opportunity Act, 15 U.S.C. § 1691(a), bars discrimination based on race, color, religion, national origin, sex, marital status, or age if the applicant has capacity to contract; public-assistance income; or good-faith exercise of consumer credit protection rights. Section 1691(b) permits specified creditworthiness inquiries, including inquiries about the amount and probable continuance of income. Public assistance itself is not a reason for denial.

Section 1691(d) generally requires notice of action within 30 days after a completed application and entitles applicants receiving adverse action to specific reasons. Section 1691(e) requires copies of written appraisals and valuations for first-lien dwelling applications promptly upon completion and no later than three days before closing, subject to a permitted timing waiver. Copies are free of additional charge; a reasonable appraisal fee may still apply.