Lenders consider many factors when evaluating your loan application and deciding whether to make a loan to you. However, they usually focus on four areas:

• Income and debt.   How much money you make and what other bills you must pay helps the lender determine whether you can afford to make mortgage payments.
• Assets.   The lender needs to make sure you have enough money to cover the up-front costs of buying a home, such as closing costs.
• Credit.   Whether you've met other financial obligations in the past helps the lender predict whether you will repay your mortgage in a timely manner.
• Property.   The home you want to buy has to be worth enough to act as collateral for the mortgage.

Taken together, these factors create a portrait of a potential borrower's risk -- that is, whether or not he or she will pay back his or her loan. If the risk seems high, the lender will be reluctant to make the loan. Depending on the degree of risk, a lender may choose to charge higher interest rates and/or fees, or decline to make the loan altogether.