In order to buy a home, the majority of people will need to take out a mortgage. A mortgage is an agreement made between a borrower and a lender that entitles the homebuyer to borrow money in order to buy the home. This agreement is made on the condition that if they fail to repay the money, the lender has the right to the property.

Mortgages are used to buy a home or to refinance a home that is already owned. They can come from banks, credit unions or other financial institutions. Regardless of where you are borrowing the money from, there will be certain criteria that needs to be met before being allowed to take out a mortgage. 


Am I Eligible for a Mortgage?

The eligibility criteria for a mortgage will vary depending on the lender and your own financial circumstances. Here we share some key factors that could determine whether or not you would be eligible for a mortgage…

  • Your credit score
  • Your deposit
  • Your debt-to-income ratio
  • Your employment history
  • The value and condition of the property




Credit Score

A person’s credit score is determined based on past transactions and borrowing behaviour. Checking the credit score is a standard first step for the majority of lenders after the initial mortgage application. In general, the higher someone’s credit score, the more likely they are to be approved for a mortgage and the better interest rates they will receive. Individuals with good credit scores are understood to be less of a risk for a lender.

For those with a poor credit score, it is not impossible that they will be approved for a mortgage, however it is usually more difficult. This is especially true for conventional mortgages. It is possible to increase your credit score by paying off outstanding debts, ensuring that payments are made on time and avoiding applying for any other type of loan or credit in the lead up to your mortgage application.



In order to take out a mortgage, lenders will typically want the borrower to put some money down on the home so that they have some equity in the property. This can work to protect the lender because if the borrower has to default on the loan, the lender will still get their money back in full regardless of any additional fees incurred.




Typically, borrowers put down 20% of the cost of the property and will borrow 80%. Most homebuyers understand that they will need to save up 20% of the property’s value in order to put down a decent deposit. However, there are mortgage products available that offer mortgages with the need for a far lower down payment. It is unlikely that you will see mortgages where the lender allows you to put down less than a 5% deposit.

Generally speaking, the higher the deposit you are able to put down, the better the terms of your loan, be it the interest rate, the total value of the loan or the length of the loan term.


Debt-to-Income Ratio

Your debt-to-income (DTI) ratio is the amount of debt an individual has relative to their income. The “debt” includes mortgage payments and other loans. For example, if the accumulated cost of your house, car loan and other loan payments is £1,500 a month, and your monthly income is £5,000, then your debt-to-income ratio would be 30%. In layman’s terms, your debt represents 30% of your income.

When applying for a traditional mortgage, debt-to-income ratios are usually capped at around 43% maximum, although this will vary from lender to lender.

In general, if you owe a lot of debt, you will be viewed as a riskier loan candidate which may in turn mean that it is harder to be approved for a mortgage or that you will have less favourable loan terms.


Employment History

All types of lenders for all types of mortgage products will require proof of employment. The majority of lenders will want evidence that you have worked for a minimum of two years and have a steady income source.




If you do not have an employer, you will need to provide proof of income. This is why freelancers, individuals who have changed jobs in the past two years, or those who have had periods of unemployment may find it more difficult to be approved for a mortgage.


The Value and Condition of the Property

Before lenders agree to loan any money to the borrower, is is common for them to want to carry out an inspection or appraisal in order to ensure that the property is good value for money and is in good condition. Basic checks should be carried out to determine that the property is sound and will not be a liability during the loan term.

The appraised value of the home will determine how much the lender is willing to lend to the borrower. Thus, if you want to pay more for a property and the lender does not agree with your offered price, you will need to put up more of the cost in addition to your down payment.